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Earnings performance measures and CEO turnover: Street versus GAAP earnings

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  • Jarva, Henry
  • Kallunki, Juha-Pekka
  • Livne, Gilad

Abstract

Prior research reports that analysts focus on street earnings, which are measures that typically exceed GAAP earnings. Using a sample of CEO turnovers from 1993 to 2016 we show that the likelihood and speed of forced CEO turnover - but not voluntary turnover - are higher when analysts exclude income-decreasing items. The association between exclusions and forced turnovers is particularly pronounced for high magnitude exclusions. We also show that greater street exclusion of income-decreasing items, the lower CEO bonus payouts. We find that boards use audited and more conservative GAAP earnings in evaluating and dismissing CEOs, except in the recent period of 2010–2016.

Suggested Citation

  • Jarva, Henry & Kallunki, Juha-Pekka & Livne, Gilad, 2019. "Earnings performance measures and CEO turnover: Street versus GAAP earnings," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 249-266.
    • Handle: RePEc:eee:corfin:v:56:y:2019:i:c:p:249-266
    DOI: 10.1016/j.jcorpfin.2019.02.005
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    More about this item

    Keywords

    Street earnings; Street exclusions; GAAP earnings; CEO turnover;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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