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CEO turnover, earnings management and value relevance. A theoretical analysis on the Italian context

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  • John M. Barrios

    ()
    (The University of Miami)

  • Marco Fasan

    ()
    (Dept. of Management, Università Ca' Foscari Venice)

  • Daniele Macciocchi

    ()
    (LUISS Guido Carli University)

Abstract

The aim of this paper is to provide a theoretical framework in order to study the relationship between earnings management and CEO turnover in Italy. The issue is relevant because it has never been tackled in the Italian context, which presents some important peculiarities when compared to other, most widely studied, corporate governance systems. We find that, according to previous literature and despite the relevant differences existing between market oriented and control-oriented systems, there should be a positive relationship between the level of earnings management and the likelihood for CEOs to be turnovered. Relying on the literature on value relevance, we also analyze the relation between CEO turnover and value relevance of earnings, which in this context is seen as a consequence of the turnover. We propose that the market may reward the company for its decision of contrasting earnings management by firing the CEO through increasing the ÒweightÓ attributed to its accounting numbers.

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Bibliographic Info

Paper provided by Department of Management, Università Ca' Foscari Venezia in its series Working Papers with number 11.

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Length: 19 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:vnm:wpdman:47

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Web page: http://www.unive.it/dip.management
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Keywords: CEO turnover; earnings management; Italy;

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