Mandatory IFRS Adoption and the Role of Accounting Earnings in CEO Turnover

55 Pages Posted: 15 Jul 2016 Last revised: 12 Dec 2017

See all articles by Joanna S. Wu

Joanna S. Wu

University of Rochester - Simon Business School

Ivy Zhang

University of California, Riverside

Date Written: November 30, 2017

Abstract

We study whether mandatory adoption of International Financial Reporting Standards (IFRS) is associated with changes in the sensitivity of CEO turnover to accounting earnings and how the impact of IFRS adoption varies with country-level institutions and firm-level incentives. We find that CEO turnover responds more to a firm’s accounting performance after adoption. This increase in turnover-to-earnings sensitivity is concentrated in countries with stronger enforcement of financial reporting and is more prominent for mandatory adopters that have strong firm-level compliance incentives. In addition, we link the change in turnover-to-earnings sensitivity directly to accounting changes due to IFRS adoption and find a stronger adoption effect when firms report large overall accounting changes and large de-recognition of loss provisions upon adoption. Some of the above findings are sensitive to the exclusion of UK firms, which account for more than half of our sample.

Keywords: IFRS, CEO turnover, turnover-performance sensitivity, enforcement

JEL Classification: J33, J41, J63, M41, M44, M47

Suggested Citation

Wu, Joanna Shuang and Zhang, Ivy, Mandatory IFRS Adoption and the Role of Accounting Earnings in CEO Turnover (November 30, 2017). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2809358 or http://dx.doi.org/10.2139/ssrn.2809358

Joanna Shuang Wu

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160D
Rochester, NY 14627
United States
585-275-5468 (Phone)
585-442-6323 (Fax)

Ivy Zhang (Contact Author)

University of California, Riverside ( email )

900 University Ave
Riverside, CA 92521
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
276
Abstract Views
1,680
Rank
201,503
PlumX Metrics