The unintended consequences of high expectations and pressure on new CEOs

Krieger, Kevin (author)
Ang, James S. (author)

Journal of business finance & accounting

1468-5957

40

3-4

2013

JEL Codes: G30, G34, M14

10.1111/jbfa.12021

We provide empirical tests of a general version of Jensen’s (2003) theory that greater scrutiny could lead to executive abuses. Our results show that new CEOs under higher expectations or pressure are more likely to report meeting analyst forecasts; however, this apparent superior performance dissipates after excluding firms having characteristics synonymous with earnings manipulation. We find evidence that new CEOs under greater pressure are considerably more likely to engage in manipulation while the link between expectations and manipulation is much weaker. The results are strongest for new CEOs whose firms report meeting forecasts and do not walk down earnings estimates.

CEO performance
pressure
expectations

uwf:22912