Biz Research Corporate Ethics
Research Fct :
Interim CEOs Are More Likely to Manipulate Earnings
Interim CEOs engage in considerably more earnings manipulation than permanent successors.
Sample Size
Based on a sample of 145 interim CEO successions in U.S. public firms from 2004 to 2008, the authors find that earnings management is 35.7% higher for interim CEOs than for the control group — and it pays off !!
Incentives for unethical behaviour
They found that an interim CEO whose earnings management was one standard deviation (roughly 35 percentage points) above the sample mean- had a 6.1% better chance of being promoted to a permanent position than someone at the mean.
Rationale
To create a good impression on key stakeholders, interim CEOs may resort to earnings management to make the firm’s performance appear better, the authors write.
Courtesy : a study led by Guoli Chen of INSEAD .
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