Interactive Reporting Bias Surrounding CEO Turnover
研究CEO更替如何导致前后任CEO的财务报告策略相互影响，发现前任报告盈余较低时，后任更可能向下偏差报告，且更替改变了盈余报告对私人信息和股价的敏感性。
This paper analyzes how CEO turnover affects successive CEOs' financial reporting decisions and the capital market price. I show that when an outgoing CEO (O) in period 1 is succeeded by an incoming CEO (N) in period 2, strategic interaction between O and N leads to interlinked earnings reports. Specifically, when the level of earnings reported by O is lower, N's reporting strategy is more likely to feature a downward reporting bias. Furthermore, by a comparison of the two-CEO setting with a setting with no CEO turnover, I show that with CEO turnover, (i) the period 2 earnings report is more sensitive to the private information of the CEO in control and less sensitive to the period 1 earnings report; (ii) the period 1 earnings report is more sensitive to the private information of the CEO in control; and (iii) the equilibrium stock price has the same sensitivities toward the associated risks, but is less sensitive to the periods 1 and 2 earnings reports. These results provide a novel explanation for managerial under-reporting bias based on strategic interaction between successive CEOs and shed light on the role of CEO turnover in earnings management behavior and capital market responses.