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Earnings management, horizon problem, and advisor posts for retiring CEOs

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  • Ishida, Souhei
  • Ogoe, Satoshi
  • Suzuki, Katsushi

Abstract

An advisor post is one of the most important post-retirement careers for a chief executive officer (CEO). Using unique hand-collected data on advisor posts in Japanese listed firms, we examine whether retiring CEOs overstate earnings to acquire an advisor post. Consistent with the horizon problem, we find that earnings overstatement is greater in the year immediately before the CEO's post-retirement career is determined to be an advisor. This relation is also more (less) pronounced for firms with weaker (stronger) internal monitoring. These results suggest that retiring CEOs choose income-increasing accounting to acquire an advisor position, and such opportunistic accounting choice is more (less) pronounced in firms with weaker (stronger) internal monitoring.

Suggested Citation

  • Ishida, Souhei & Ogoe, Satoshi & Suzuki, Katsushi, 2023. "Earnings management, horizon problem, and advisor posts for retiring CEOs," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:pacfin:v:78:y:2023:i:c:s0927538x23000380
    DOI: 10.1016/j.pacfin.2023.101972
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    1. Ogoe, Satoshi & Suzuki, Katsushi, 2023. "Former CEO advisors and firm performance," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Earnings management; Horizon problem; Advisor; CEO post-retirement career; Co-opted board; Board independence;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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