Earnings baths by bank CEOs during turnovers
Publikation: Arbeits- oder Diskussionspapiere und Berichte › Arbeits- oder Diskussionspapiere
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Earnings baths by bank CEOs during turnovers. / Bornemann, Sven; Pfingsten , Andreas; Kick, Thomas et al.
1. Aufl. Frankfurt am Main : Deutsche Bundesbank, 2014. (Bundesbank Discussion Paper; Band 2014, Nr. 5).Publikation: Arbeits- oder Diskussionspapiere und Berichte › Arbeits- oder Diskussionspapiere
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TY - UNPB
T1 - Earnings baths by bank CEOs during turnovers
AU - Bornemann, Sven
AU - Pfingsten , Andreas
AU - Kick, Thomas
AU - Schertler, Andrea
PY - 2014
Y1 - 2014
N2 - This study investigates the development of income-decreasing discretionary expenses surrounding CEO turnovers at banks. We expect incoming CEOs to take an earnings bath during the initial stage of their tenure. For a sample of German banks over the period 1993-2012, we document that (1) incoming CEOs increase discretionary expenses, i. e. engage in big bath accounting, during their first (partial) year in charge, (2) incoming CEOs from outside the bank take a larger earnings bath than insiders, and (3) incoming CEOs take a smaller earnings bath when the incumbent CEOs retire than when they leave for other reasons. Our findings are robust to several modifications. Most importantly, they also hold true when the incoming CEO’s objective of rectifying shortages in the existing stock of risk provisions has been taken into account, which may provide an alternative explanation for observing extraordinary amounts of discretionary expenses in turnover years.
AB - This study investigates the development of income-decreasing discretionary expenses surrounding CEO turnovers at banks. We expect incoming CEOs to take an earnings bath during the initial stage of their tenure. For a sample of German banks over the period 1993-2012, we document that (1) incoming CEOs increase discretionary expenses, i. e. engage in big bath accounting, during their first (partial) year in charge, (2) incoming CEOs from outside the bank take a larger earnings bath than insiders, and (3) incoming CEOs take a smaller earnings bath when the incumbent CEOs retire than when they leave for other reasons. Our findings are robust to several modifications. Most importantly, they also hold true when the incoming CEO’s objective of rectifying shortages in the existing stock of risk provisions has been taken into account, which may provide an alternative explanation for observing extraordinary amounts of discretionary expenses in turnover years.
KW - Management studies
KW - CEO turnover
KW - Earnings management
KW - Big bath accounting
KW - Discretionary expenses
KW - Financial institutions
KW - Psychology
M3 - Working papers
SN - 978–3–95729–014–4
T3 - Bundesbank Discussion Paper
BT - Earnings baths by bank CEOs during turnovers
PB - Deutsche Bundesbank
CY - Frankfurt am Main
ER -