Earnings baths by CEOs during turnovers: empirical evidence from German savings banks

Bornemann, Sven; Kick, Thomas; Pfingsten, Andreas; Schertler, Andrea

doi:10.1016/j.jbankfin.2014.12.005

Cited by 27 publications

(59 citation statements)

References 64 publications

(85 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…His or her position is more prominent during top management turnovers (Bornemann et al 2015). Our study extends previous studies on top management changes by incorporating the effect of CEO/MD succession on the value relevance of accounting numbers.…”

Section: Resultssupporting

confidence: 56%

“…It is believed that incoming CEO/MD may significantly Equation 3a Equation 2b Equation 3b BE TMC and BE,CEPS = interaction between TMC and EPS,CBE1 = interaction between TMC_1 and BE,CEPS1 = interaction between TMC_1 and EPS,CBE2 =interaction between TMC_C and BE,and CEPS2 = interaction between TMC_C and EPS utilize accounting choice which reflects an increase in reported earnings during their initial years to indicate significant improvement under his/her stewardship (Bornemann et al 2015 (CBE2) is not positively and significantly related to share price. Thus, we to conclude that H2 is partly supported.…”

Section: Multiple Regression Resultsmentioning

confidence: 99%

“…We then performed separate regression analyses for companies with CEO/MD successor from outside and companies with CEO/MD from inside of organization. (Bornemann et al 2015;Tokuga & Yamashita 2011;Pourciau 1993) which indicate that earnings management is strongly linked with outside successor because it is said that outsider is under a lot of pressure to bring an improved performance/to turn performance around after succession (Bornemann et al 2015;Shen & Cannella 2002). Hence, investors lose confidence on EPS over firms with outside successor.…”

Section: Multiple Regression Resultsmentioning

confidence: 99%

“…We acknowledge that studies on CEO/MD succession are still limited in Malaysia despite fact that research studies in this area have been around for more than 40 years (Bornemann, Kick, Pfingsten & Schertler 2015;Ferris, Jayaraman & Lim 2015). Hence, this current study extends the limited literature on CEO/MD succession in Malaysian context.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Ahmad

Hassan

Jaffar

2016

AJAG

View full text Add to dashboard Cite

show abstract

Section: Resultssupporting

confidence: 56%

Section: Multiple Regression Resultsmentioning

confidence: 99%

Section: Multiple Regression Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Ahmad

Hassan

Jaffar

2016

AJAG

View full text Add to dashboard Cite

show abstract

“…Parrino (1997) and Huson, Parrino, and Starks (2001) provide evidence that executives are much more likely to be appointed from the outside when the corporation faces financially bad times. Bornemann, Kick, Pfingsten, and Schertler (2015) argue that external successors are more often appointed when the bank needs a clear revision of its strategy. Thus, poorperforming and high-risk banks tend to appoint outsiders more often than other banks in order to bring in new talent, increase expertise in the boardroom and clean up the bank.…”

Section: Hypothesis Development and Study Designmentioning

confidence: 99%

Do all new brooms sweep clean? Evidence for outside bank appointments

Kick

Nehring

Schertler

2017

Journal of Banking & Finance

Self Cite

View full text Add to dashboard Cite

We investigate whether bank executive directors appointed from outside the bank ("outsiders") improve post-succession performance and whether some outsiders are better predisposed than others to turn around a bank's performance. In the case of banks, this question is highly relevant because regulatory authorities may regard the replacement of the management team as a chance to clean up financially distressed banks. Our sample compromises all universal banks for the period 1993 to 2014. ContributionFirst, the results of our study contribute to the existing literature on the post-succession effects of executive turnovers by documenting a performance differential between outsiders with strong and poor managerial abilities in the years following their appointment. Second, we add to the literature examining managerial ability by extracting managerial ability from the risk-return efficiency of executive directors' previous banks. Third, we add to the literature dealing with the financial crisis by measuring the performance effects separately for the pre-and post-crisis period. ResultsOur study documents the negative performance effects in the years following the appointment of an outsider on banks making such appointments. We find that executives with poor managerial abilities ("bad outsiders") underperform at their new banks during the post-appointment period whereas executives with strong managerial abilities ("good outsiders") do so only at the very beginning of the post-appointment period. Thus, not all executive directors appointed from outside are equally capable of improving bank performance. Our results further suggest that the performance differential between good and bad outsiders strengthens in the post-crisis period. We systematically rule out that these performance differentials following external appointments are driven by appointing good outsiders to boards of banks with a low risk exposure. Banks in bad financial shape are more likely to appoint executive directors from the outside than those in good shape. It is, however, not clear whether all of these appointments necessarily lead to the desired turnaround. We analyze the performance effects of new board members with external boardroom experience (outsiders) by distinguishing between good and bad managerial abilities of executives based on either ROA or risk-return efficiency of their previous employers. Our results show that banks appointing bad outsiders underperform other banks while those appointing good outsiders do so to a lesser extent. The performance differentials are highly pronounced in high-risk banks and in the post-crisis period.

show abstract

Corporate tax avoidance: The impact of performance above aspiration and CEO experience

Qin,

Lin,

Xin

2023

Asia Pac J Manag

View full text Add to dashboard Cite

Earnings baths by CEOs during turnovers: empirical evidence from German savings banks

Cited by 27 publications

References 64 publications

Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Do all new brooms sweep clean? Evidence for outside bank appointments

Corporate tax avoidance: The impact of performance above aspiration and CEO experience

Contact Info

Product

Resources

About