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The Unintended Consequences of High Expectations and Pressure on New CEOs
Author(s) -
Krieger Kevin,
Ang James S.
Publication year - 2013
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12021
Subject(s) - scrutiny , earnings , unintended consequences , empirical evidence , economics , accounting , business , monetary economics , political science , law , philosophy , epistemology
We provide empirical tests of a general version of targeting theory that greater scrutiny could lead to executive abuses. Our results show that new CEOs under higher expectations or pressure are more likely to report meeting analyst forecasts; however, this apparent superior performance dissipates after excluding firms having characteristics synonymous with earnings manipulation. We find evidence that new CEOs under greater pressure are considerably more likely to engage in manipulation while the link between expectations and manipulation is much weaker. The results are strongest for new CEOs whose firms report meeting forecasts and do not “walk down” earnings estimates.