Management Forecast Accuracy and CEO Turnover

Lee, Sam; Matsunaga, Steven R.; Park, Chul W.

doi:10.2308/accr-50220

Cited by 180 publications

(128 citation statements)

References 51 publications

Supporting

Mentioning

115

Contrasting

Order By: Relevance

“…In addition, the coefficient on Precision and Accuracy is significantly negative in models 4 and 6, suggesting that the more precise and accurate forecasts are the less likely it is that board secretaries will be replaced. Our result also provides additional support for the findings of Lee et al (2012), who suggest that management forecast errors increase the probability of managerial turnover. Furthermore, the regression results show that board secretaries with a dual board role have a high tendency to be replaced.…”

Section: Management Earnings Forecasts and Board Secretary Turnoversupporting

confidence: 79%

“…Trueman (1986) reports that investors use management forecast quality to evaluate managers' ability to adjust production plans according to foreseeable changes in the business environment. Lee et al (2012) find that inaccurate management earnings forecasts result in the replacement of CEOs in firms with poor earnings performance. This implies that boards of directors in these firms use management earnings forecast accuracy to evaluate CEOs' ability in uncertain business environments when making decisions on CEO replacement.…”

Section: Literature and Hypothesis Development Related Literaturementioning

confidence: 99%

“…Lee et al (2012) further show that management earnings forecast errors increase the likelihood of poorly performing CEOs being replaced. These studies generally suggest that management earnings forecasts provide an important signal of managerial ability.…”

Section: Management Earnings Forecasts and Board Secretary Paymentioning

confidence: 99%

See 2 more Smart Citations

Do Board Secretaries Influence Management Earnings Forecasts?

Duan

Hou

2017

J Bus Ethics

View full text Add to dashboard Cite

The role of board secretaries is a unique institutional feature in China. Individuals in this senior executive role are responsible for coordinating information disclosure. We study the impact of board secretaries on management earnings forecasts and find that their legal expertise, accounting expertise and foreign experience help improve management earnings forecast quality. The quality of forecasts, as indicated by their occurrence, frequency, precision and accuracy, is also positively associated with the role duality (e.g. board director, CFO or other senior executive role) and equity holdings of board secretaries and negatively associated with their political connection. The quality of forecasts is found to increase the compensation of board secretaries. Finally, we show that the equity holding of board secretaries reduces litigation risks and increases corporate philanthropic giving.

show abstract

Section: Management Earnings Forecasts and Board Secretary Turnoversupporting

confidence: 79%

Section: Literature and Hypothesis Development Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Do Board Secretaries Influence Management Earnings Forecasts?

Duan

Hou

2017

J Bus Ethics

View full text Add to dashboard Cite

show abstract

“…Prior research indicates that CEOs are more likely to be dismissed when a firm's performance fails to meet the market's expectation (Bushman et al 2010;Lee et al 2012;Jenter and Kanaan 2015). A poorly perceived CEO is considered a symptom of the board's failure to carry out its monitoring duties over the CEO (Fischer et al 2009).…”

Section: Sop Ceo Turnover and Outside Directorshipmentioning

confidence: 99%

Life after a Shareholder Pay 'Strike': Consequences for ASX-Listed Firms

et al. 2016

View full text Add to dashboard Cite

Abstract"Say on pay" legislation has been introduced in several countries but Australia's version, namely the "two-strikes" rule, is unique in that it empowers shareholders to vote on a board spill if the compensation report of a public company receives 25% or more dissenting votes for two consecutive years. We test the proposition that the "two strikes" rule has increased directors' accountability beyond executive pay because it has substantially lowered the cost to activists of organizing sufficient votes to threaten managers with a board spill. Consistent with this expectation, we find Australian firms respond to negative say-on-pay votes by curbing excessive CEO pay, reducing the growth rate of pay and changing the pay mix. In addition, the results suggest that the market regards negative SOP votes as a value-destroying signal since there is a negative market reaction, lower valuation and long-run underperformance. We also find an increase in CEO turnover but directors do not seem to bear reputational costs through the loss of outside directorships. The findings provide important insights to investors, company directors and regulators.

show abstract

“…36 It is noteworthy that executives who are not overconfident are unlikely to provide narrower forecasts ranges. That is because CEOs face with higher forced turnover rate when they subsequently miss their biased forecasts (Lee, Matsunaga, & Park, 2012). However, in Section 3.3.1, I further discuss how I mitigate CEOs' incentives to issue positive biased earnings forecasts during major corporate events.…”

mentioning

confidence: 99%

Managerial Overconfidence and Corporate Finance Policies

Huang¹

View full text Add to dashboard Cite

Traditional corporate finance models generally assume that agents are fully rational, but this assumption is not consistent with evidence from the psychology literature. For example, a particular type of bias, overconfidence, has been shown to have a substantial impact on various corporate decisions. Accordingly, this thesis aims to contribute to the fast-growing behavioral corporate finance literature by focusing on how overconfidence affects corporate finance policies. There are two types of overconfidence: (1) optimism and (2) miscalibration. Optimism is defined as agents' overestimation of the mean for uncertain distributions, whereas miscalibration is defined as agents' underestimation of variance.In the first study, I examine how CEO optimism affects corporate debt maturity choices. I first develop a simple model to illustrate that optimistic CEOs prefer more short-term debt and then empirically examine this prediction. Consistent with a demand-side story, I find that firms with optimistic CEOs tend to adopt a shorter debt maturity structure by using a higher proportion of shortterm debt (due within 12 months). This behavior of optimistic CEOs is not deterred by the high liquidity risk associated with such a financing strategy. The demand-side explanation remains robust even after considering six alternative drivers, including a competing supply-side explanation in which creditors are reluctant to extend long-term debt to optimistic CEOs.Due to the lack of a reliable measure for the second type of overconfidence, miscalibration, researchers are normally constrained from empirically examining the impact of miscalibration on corporate finance policies. In the second study, I develop accessible empirical measures to disentangle optimism and miscalibration through a novel exploitation of earnings forecasts issued by firm managers. Optimism is proxied by the earnings forecast error, whereas miscalibration is derived from the earnings forecast interval, after controlling for confounding factors. The resulting measures capture different aspects of the link between overconfidence and managerial decisions. In terms of investment, miscalibrated CEOs are more likely to scale up investment in real assets (especially via mergers and acquisitions); firms with optimistic CEOs display no such proclivity.In the third study, leveraging the overconfidence measures developed in the second study, I examine whether and to what extent optimism and miscalibration affect debt-equity choices differently. This study is important because the various types of overconfidence can have countervailing implications for debt or equity choices based on alternative capital structure theories.I show that firms with miscalibrated CEOs are more likely to issue debt both conditional and unconditional on accessing the external financing market, resulting in a greater increase in leverage.I further show that miscalibrated CEOs' reluctance to issue equity is attenuated by higher stock valuation. In contrast, firms with optimistic CEOs are fo...

show abstract

Management Forecast Accuracy and CEO Turnover

Cited by 180 publications

References 51 publications

Do Board Secretaries Influence Management Earnings Forecasts?

Do Board Secretaries Influence Management Earnings Forecasts?

Life after a Shareholder Pay 'Strike': Consequences for ASX-Listed Firms

Managerial Overconfidence and Corporate Finance Policies

Contact Info

Product

Resources

About