Earnings Management Surrounding CEO Turnover: Evidence from Korea
研究了2001-2010年韩国403次CEO更替中，离任和继任CEO如何通过应计项目和真实活动操纵盈余，发现仅在强制离任且内部继任时存在显著操纵。
This article examines the empirical relation between chief executive officer (CEO) turnover and earnings management in K orea using a sample of 403 CEO turnovers and 806 non‐turnover control firms during the period 2001–2010. We classify CEO turnovers into four types depending on whether the departure of the outgoing CEO is peaceful or forced and whether the incoming CEO is promoted from within or recruited from outside the firm. We measure earnings management by both discretionary accruals and real activities management. We also control for the endogeneity of CEO turnover and a potential selection bias using 2 SLS and H eckman's two‐stage approach. After controlling for corporate financial performance and governance structure, we find upward earnings management by the departing CEO only when the departure is forced and the new CEO is an insider. In this case, the new CEO also engages in downward earnings management using both discretionary accruals and real activities management. We also find some evidence that the new CEO recruited from outside the firm manages discretionary accruals upward following the peaceful departure of his predecessor. In all other types of CEO turnover, we do not find evidence of significant earnings management by either CEO .