Insider versus outsider CEOs, executive compensation, and accounting manipulation

• 成果类型: Article
• 署名作者: Jongjaroenkamol, Prasart; Laux, Volker
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2017.01.002
• 发表日期: 2017
• 关键词: earnings manipulation; corporate governance; firm performance; INFORMATION; succession; turnover; pay; replacement; management; dismissal

摘要

This paper examines the role of the financial reporting environment in selecting a new CEO from within versus outside the organization. Weak reporting controls allow the CEO to misreport performance information, which reduces the board's ability to detect and replace poorly-performing CEOs as well as aggravates incentive contracting. We show that these adverse effects are stronger when the CEO is an outsider rather than an insider. Our model predicts that boards are more likely to recruit a CEO from the outside when the performance measures with which the new hire is assessed are harder to manipulate. (C) 2017 Elsevier B.V. All rights reserved.