Earnings performance measures and CEO turnover: Street versus GAAP earnings

Henry Jarva; Juha Pekka Kallunki; Gilad Livne

doi:10.1016/j.jcorpfin.2019.02.005

Earnings performance measures and CEO turnover: Street versus GAAP earnings

Henry Jarva^*, Juha Pekka Kallunki, Gilad Livne

^*Corresponding author for this work

Department of Accounting

Research output: Contribution to journal › Article › Scientific › peer-review

11 Citations (Scopus)

111 Downloads (Pure)

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.

Original language	English
Pages (from-to)	249-266
Number of pages	18
Journal	JOURNAL OF CORPORATE FINANCE
Volume	56
DOIs	https://doi.org/10.1016/j.jcorpfin.2019.02.005
Publication status	Published - 1 Jun 2019
MoE publication type	A1 Journal article-refereed

Keywords

CEO turnover
GAAP earnings
Street earnings
Street exclusions

Access to Document

10.1016/j.jcorpfin.2019.02.005

JCF Manuscript - Feb 6-2019Accepted author manuscript, 1.15 MBLicence: CC BY-NC-ND

Cite this

@article{7c1d7ae0c2754b6e9d8f288cd2ece034,

title = "Earnings performance measures and CEO turnover: Street versus GAAP earnings",

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.",

keywords = "CEO turnover, GAAP earnings, Street earnings, Street exclusions",

author = "Henry Jarva and Kallunki, {Juha Pekka} and Gilad Livne",

year = "2019",

month = jun,

day = "1",

doi = "10.1016/j.jcorpfin.2019.02.005",

language = "English",

volume = "56",

pages = "249--266",

journal = "JOURNAL OF CORPORATE FINANCE",

issn = "0929-1199",

publisher = "Elsevier Science B.V.",

}

TY - JOUR

T1 - Earnings performance measures and CEO turnover

T2 - Street versus GAAP earnings

AU - Jarva, Henry

AU - Kallunki, Juha Pekka

AU - Livne, Gilad

PY - 2019/6/1

Y1 - 2019/6/1

N2 - 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.

AB - 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.

KW - CEO turnover

KW - GAAP earnings

KW - Street earnings

KW - Street exclusions

UR - http://www.scopus.com/inward/record.url?scp=85062341193&partnerID=8YFLogxK

U2 - 10.1016/j.jcorpfin.2019.02.005

DO - 10.1016/j.jcorpfin.2019.02.005

M3 - Article

AN - SCOPUS:85062341193

SN - 0929-1199

VL - 56

SP - 249

EP - 266

JO - JOURNAL OF CORPORATE FINANCE

JF - JOURNAL OF CORPORATE FINANCE

ER -

Earnings performance measures and CEO turnover: Street versus GAAP earnings

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this