Earnings performance measures and CEO turnover : street versus GAAP earnings
Jarva, Henry; Kallunki, Juha-Pekka; Livne, Gilad (2019-02-26)
Henry Jarva, Juha-Pekka Kallunki, Gilad Livne, Earnings performance measures and CEO turnover: Street versus GAAP earnings, Journal of Corporate Finance, Volume 56, 2019, Pages 249-266, ISSN 0929-1199, https://doi.org/10.1016/j.jcorpfin.2019.02.005
© 2019. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/.
https://creativecommons.org/licenses/by-nc-nd/4.0/
https://urn.fi/URN:NBN:fi-fe2019061320428
Tiivistelmä
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.
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