Explaining CEO retention in misreporting firms

• 成果类型: Article
• 署名作者: Beneish, Messod D.; Marshall, Cassandra D.; Yang, Jun
• 署名单位: Indiana University System; Indiana University Bloomington; IU Kelley School of Business; University of Richmond
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.12.004
• 发表日期: 2017
• 页码: 512-535
• 关键词: CEO TURNOVER; CFO turnover; FRAUD; RESTATEMENTS; Insider trading; Litigation costs; Replacement costs

摘要

We propose a framework that advances our understanding of Chief Executive Officer (CEO) retention decisions in misreporting firms. Consistent with economic intuition, outside directors are more likely to fire (retain) CEOs when retention (replacement) costs are high relative to replacement (retention) costs. When the decision is ambiguous because neither cost dominates, outside directors are more likely to retain the CEO when they both benefit from selling stock in the misreporting period. We show that joint abnormal selling captures director-CEO alignment incrementally to biographical overlap. This new proxy operationalizes information sharing and trust, making it useful for studying economic decision making embedded in social relationships. (C) 2016 Elsevier B.V. All rights reserved.