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Earnings performance measures and CEO turnover: Street versus GAAP earnings

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  • Jarva, Henry
  • Kallunki, Juha-Pekka
  • Livne, Gilad

Abstract

Prior research reports that analysts focus on street earnings, which are measures that typically exceed GAAP earnings. Using a sample of CEO turnovers from 1993 to 2016 we show that the likelihood and speed of forced CEO turnover - but not voluntary turnover - are higher when analysts exclude income-decreasing items. The association between exclusions and forced turnovers is particularly pronounced for high magnitude exclusions. We also show that greater street exclusion of income-decreasing items, the lower CEO bonus payouts. We find that boards use audited and more conservative GAAP earnings in evaluating and dismissing CEOs, except in the recent period of 2010–2016.

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  • Jarva, Henry & Kallunki, Juha-Pekka & Livne, Gilad, 2019. "Earnings performance measures and CEO turnover: Street versus GAAP earnings," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 249-266.
    • Handle: RePEc:eee:corfin:v:56:y:2019:i:c:p:249-266
    DOI: 10.1016/j.jcorpfin.2019.02.005
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    More about this item

    Keywords

    Street earnings; Street exclusions; GAAP earnings; CEO turnover;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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