Abstract
A growing literature provides evidence that peer considerations play a central role in shaping a firm’s behavior. This paper documents that the frequency of forced CEO turnovers by product market peer firms is negatively associated with a firm’s real earnings management. I find that the disciplinary role of forced CEO turnover explains the observed relation. These effects are stronger when firms are suspected to engage in real earnings management to meet or just beat earnings benchmarks. I find some evidence that peers’ forced CEO turnovers reveal a link between real earnings management and subsequent operating failure. Overall, my findings suggest that observing product market peers’ forced CEO turnovers provides an informative signal to discipline a firm’s real earnings management behavior.
| Original language | English |
|---|---|
| Pages (from-to) | 479-501 |
| Number of pages | 23 |
| Journal | Accounting Review |
| Volume | 98 |
| Issue number | 7 |
| DOIs | |
| State | Published - Nov 2023 |
ASJC Scopus Subject Areas
- Accounting
- Finance
- Economics and Econometrics
Keywords
- CEO turnover
- corporate governance
- product market peers
- real earnings management
- relative evaluation
- spillover effects
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