Accounting Losses as a Heuristic for Managerial Failure: Evidence from CEO Turnovers

Aloke Ghosh, Jun Wang*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

4 Citations (Scopus)

Abstract

We study the effects of accounting losses on CEO turnover. If accounting losses provide incremental information about managerial ability, boards can utilize the information in losses to assess CEO's stewardship of assets, which is why losses may serve as a heuristic for managerial failure. We find a positive relation between losses and subsequent CEO turnover after controlling for other accounting and stock performance measures. We also find that losses are associated with an increase in board activity and that losses predict poor operating performance and future financial problems. Our results explain why CEOs manage earnings to avoid losses.

Original languageEnglish
Peer-reviewed scientific journalJournal of Financial and Quantitative Analysis
Volume54
Issue number2
Pages (from-to)877-906
Number of pages30
ISSN0022-1090
DOIs
Publication statusPublished - 28.08.2018
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management

Fingerprint Dive into the research topics of 'Accounting Losses as a Heuristic for Managerial Failure: Evidence from CEO Turnovers'. Together they form a unique fingerprint.

  • Cite this