Publication Type

Journal Article

Publication Date

4-2017

Abstract

This paper examines the role of the financial reporting environment in selecting a new CEO from within versus outside the organization. Weak reporting controls allow the CEO to misreport performance information, which reduces the board's ability to detect and replace poorly-performing CEOs as well as aggravates incentive contracting. We show that these adverse effects are stronger when the CEO is an outsider rather than an insider. Our model predicts that boards are more likely to recruit a CEO from the outside when the performance measures with which the new hire is assessed are harder to manipulate.

Keywords

Insider versus outsider CEOs, CEO compensation, CEO turnover, Accounting manipulation

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting and Economics

Volume

63

Issue

2-3

First Page

253

Last Page

261

ISSN

0165-4101

Identifier

10.1016/j.jacceco.2017.01.002

Publisher

Elsevier: 24 months

Additional URL

http://doi.org/10.1016/j.jacceco.2017.01.002

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