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Real earnings management around CEO turnovers
Author(s) -
Geertsema Paul G.,
Lont David H.,
Lu Helen
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12434
Subject(s) - restructuring , earnings , business , earnings management , labour economics , capital (architecture) , monetary economics , accounting , demographic economics , economics , finance , archaeology , history
Following CEO turnovers, US firms adjust real business activities to manage earnings downwards ( REM bath). This effect is most pronounced in firms with low levels of institutional ownership. REM baths early in CEOs’ tenure can be confounded with legitimate adjustments to business activities. However, we show that they are not accompanied by increases in R&D or capital expenses, nor are they explained by restructuring expenses. CEOs with short tenure record more negative REM measures in their first year of tenure, when compared with CEOs with long tenure.