Earnings management surrounding CEO changes

Wells, P

Earnings management surrounding CEO changes

Wells, P

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2002, 42 (2), pp. 169 - 193
Issue Date:: 2002-01-01

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Field	Value	Language
dc.contributor.author	Wells, P https://orcid.org/0000-0001-6822-4826	en_US
dc.date.issued	2002-01-01	en_US
dc.identifier.citation	Accounting and Finance, 2002, 42 (2), pp. 169 - 193	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10017
dc.description.abstract	This paper investigates the extent of earnings management in the periods surrounding CEO changes by Australian firms. Evidence is presented of incoming CEOs undertaking earnings management to reduce income in the year of CEO change, with abnormal and extraordinary items being the primary vehicle through which this is achieved. This result is consistent with the notion of new CEOs engaging in an 'earnings bath', and is strongest for non-routine CEO changes, where the opportunities to manage earnings are greatest. Extending prior work, classification of CEO changes as routine or non-routine is based on an expanded information search, and this provides insights into the CEO change process and identifies problems with simpler mechanistic classification methods. Additionally, detailed information of the operation of the modified Jones model for estimating expected accruals is presented, and this is consistent with such models having low explanatory power in identifying abnormal accruals. © AAANZ, 2002.	en_US
dc.relation.ispartof	Accounting and Finance	en_US
dc.relation.isbasedon	10.1111/1467-629X.00073	en_US
dc.subject.classification	Accounting	en_US
dc.title	Earnings management surrounding CEO changes	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	42	en_US
utslib.for	150303 Corporate Governance and Stakeholder Engagement	en_US
utslib.for	150103 Financial Accounting	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	2	en_US
pubs.publication-status	Published	en_US
pubs.volume	42	en_US

Abstract:

This paper investigates the extent of earnings management in the periods surrounding CEO changes by Australian firms. Evidence is presented of incoming CEOs undertaking earnings management to reduce income in the year of CEO change, with abnormal and extraordinary items being the primary vehicle through which this is achieved. This result is consistent with the notion of new CEOs engaging in an 'earnings bath', and is strongest for non-routine CEO changes, where the opportunities to manage earnings are greatest. Extending prior work, classification of CEO changes as routine or non-routine is based on an expanded information search, and this provides insights into the CEO change process and identifies problems with simpler mechanistic classification methods. Additionally, detailed information of the operation of the modified Jones model for estimating expected accruals is presented, and this is consistent with such models having low explanatory power in identifying abnormal accruals. © AAANZ, 2002.

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http://hdl.handle.net/10453/10017