Earnings management surrounding forced CEO turnover: evidence from the U.S. property-casualty insurance industry

Cheng, Jiang; Cummins, J. David; Lin, Tay-Jyi

doi:10.1007/s11156-020-00910-z

Cited by 10 publications

(3 citation statements)

References 60 publications

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“…Accounting conservatism could facilitate directors, particularly outside directors, as a beneficial tool in showing their responsibilities of ratifying and monitoring crucial decisions [9]. As a result, the stronger board with more independence in decision-making is likely to be efficient at appreciating the benefits of conservatism, so they are more inclined to require conservative accounting practices [10]. Insider-dominated boards or boards with limited monitoring incentives, on the other hand, are more likely to allow managers to employ aggressive (less conservative) accounting.…”

Section: -Introductionmentioning

confidence: 99%

Ownership Concentration and Accounting Conservatism: The Moderating Role of Board Independence

Phan

Ngo

et al. 2022

Emerg Sci J

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The purpose of this study is to examine the moderating effect of board independence on the relationship between ownership concentration and accounting conservatism. Using fixed-effect regressions for a sample of 165 Vietnamese listed companies from 2007 to 2017, the results revealed that the proportion of outstanding shares owned by the largest shareholder is negatively associated with accounting conservatism and board independence plays a moderating role in this relationship. Our results are robust after applying alternative measures of the largest ownership and correcting for potential endogeneity using fixed-effects regression with instrumental variables. Overall, our evidence shows that firms with concentrated ownership should keep a high non-executive ratio to maintain accounting conservatism. In other words, increasing the number of non-executive directors on boards in firms with a substantial proportion of shares held by the largest shareholder is likely to strengthen the information environment, giving financial reporting more credibility.JEL Classification: G30; G32. Doi: 10.28991/ESJ-2023-07-01-07 Full Text: PDF

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Section: -Introductionmentioning

confidence: 99%

Ownership Concentration and Accounting Conservatism: The Moderating Role of Board Independence

Phan

Ngo

et al. 2022

Emerg Sci J

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“…Very often, for example, studies focus on earnings management in banks, for example [21] focused on African banks, [22] on US banks, [23] analysed Iranian banks and [24] Islamic banks. Other areas of application include, for example, insurance, which have been addressed by [25]. We would find many more such areas, but it is not clear whether the results of these studies can be generalized to other sectors.…”

Section: Discussionmentioning

confidence: 99%

Cluster analysis of the economic activity of Slovak companies regarding potential indicators of earnings management

Ďurica

Švábová

2021

SHS Web of Conf.

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Research background: All over the world, any information about the earnings manipulation is very important for all the stakeholders of the companies. Therefore, it is necessary to detect this situation in a certain way. The global practice has shown that it is appropriate to create detection models and it would be very useful to specify individual sectors or the groups of sectors of economic activities of companies. Purpose of the article: The article aims to the financial ratios of Slovak companies that are globally used in the detection of earnings management. Based on hierarchical cluster analysis we identify groups of economic activities (according to the international NACE classification) with similar financial characteristics. Methods: For efficient earnings manipulation detection, high-quality and up-to-date financial data is required. We used financial data of real Slovak companies from the year 2018 obtained from international database Amadeus. After a precise pre-preparation of the dataset, we use the standard clustering procedures. Using the analysis of the dendrogram, the groups of the companies with their economic activities are identified. Findings & Value added: The results of the analysis show that there exist logical groups of NACE categories of economic activity of companies with similar characteristics. Regarding potential earnings manipulation, companies in these groups are as similar as possible. Therefore, financial characteristics can be analyzed together, and more accurate detection models could be created for them.

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“…They discover that CEOs facing termination try to boost earnings performance by cutting discretionary spending such as R&D, advertising, and rent in order to boost earnings and improve financial performance. According to Cheng et al (2021) incumbent CEOs of publicly traded firms manage earnings upward before forced turnovers, supporting the cover-up hypothesis while closely held firms show no evidence of this relationship.…”

Section: Introductionmentioning

confidence: 86%

Big Bath Accounting in an Emerging Market: Evidence from Newly Appointed CEOs in Brazil

Silva¹,

Tardin

Monte-mor

et al. 2023

Journal of Technology Management & Innovation

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This study examines the prevalence of big bath accounting in an emerging market context, focusing on newly appointed CEOs of Brazilian firms. We find evidence of big bath accounting in Brazil and extends the big bath and CEO turnover literature by documenting a limit to downward earnings manipulation and by using Brazil as a source of study. Our results suggest that incumbent CEOs have incentives to manage profits downward only when the company was previously profitable, rather than risking worsening an already bad situation, in the case of unprofitable firms. We also find that they are more likely to use accrual earnings management, rather than reducing production or increasing discretionary expenditures, as tool to decrease earnings level. Overall, our study fills a gap in the literature and supports future research in understanding the big bath CEO turnover scenario in Brazilian firms.

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Earnings management surrounding forced CEO turnover: evidence from the U.S. property-casualty insurance industry

Cited by 10 publications

References 60 publications

Ownership Concentration and Accounting Conservatism: The Moderating Role of Board Independence

Ownership Concentration and Accounting Conservatism: The Moderating Role of Board Independence

Cluster analysis of the economic activity of Slovak companies regarding potential indicators of earnings management

Big Bath Accounting in an Emerging Market: Evidence from Newly Appointed CEOs in Brazil

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