TY  - CHAP
AB  - Abstract This study investigates whether CEOs exercise discretion in recognizing environmental liabilities surrounding their turnover. Extant theories on the agency problem predict that outgoing CEOs tend to boost or maintain the reported earnings in their final years (“Horizon” problem or “Cover-up”) and incoming CEOs sacrifice the reported earnings in their transitions year (“big-bath”). We find empirical evidence that incoming CEOs recognize significantly higher environmental liabilities in their transition year compared to the following years, supporting the “big-bath” hypothesis. This finding provides evidence that CEOs use environmental liabilities as a tool of earnings management surrounding their turnover in an attempt to maximize their accounting-based compensation.
VL  - 16
SN  - 978-1-78052-618-8/1041-7060
DO  - 10.1108/S1041-7060(2013)0000016008
UR  - https://doi.org/10.1108/S1041-7060(2013)0000016008
AU  - Freedman Martin
AU  - Park Jin Dong
AU  - Romero Jorge
PY  - 2013
Y1  - 2013/01/01
TI  - Recognizing Environmental Liabilities Surrounding CEO Turnovers
T2  - Managing Reality: Accountability and the Miasma of Private and Public Domains
T3  - Advances in Public Interest Accounting
PB  - Emerald Group Publishing Limited
SP  - 117
EP  - 143
Y2  - 2024/09/19
ER  -