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CEO tenure and earnings management

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  • Ali, Ashiq
  • Zhang, Weining

Abstract

This study examines changes in CEOs׳ incentive to manage their firms׳ reported earnings during their tenure. Earnings overstatement is greater in the early years than in the later years of CEOs׳ service, and this relation is less pronounced for firms with greater external and internal monitoring. These results suggest that new CEOs try to favorably influence the market׳s perception of their ability in their early years of service, when the market is more uncertain. Also, consistent with the horizon problem, earnings overstatement is greater in the CEOs׳ final year, but this result obtains only after controlling for earnings overstatement in their early years of service.

Suggested Citation

  • Ali, Ashiq & Zhang, Weining, 2015. "CEO tenure and earnings management," Journal of Accounting and Economics, Elsevier, vol. 59(1), pages 60-79.
    • Handle: RePEc:eee:jaecon:v:59:y:2015:i:1:p:60-79
    DOI: 10.1016/j.jacceco.2014.11.004
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    More about this item

    Keywords

    CEO career concerns; CEO reputation; Horizon problem of departing CEOs; Earnings management;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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