Accounting irregularities and executive turnover in founder-managed firms

Andrew J. Leone, Michelle Liu

Research output: Contribution to journalReview article

38 Scopus citations

Abstract

This study tests the hypothesis that founder CEOs are less likely to be fired than non-founder CEOs when accounting irregularities are disclosed. We also examine whether CFOs are more likely to shoulder the blame when the CEO is a founder. Using a sample of 96 newly public firms with accounting irregularities, and a control sample of similar newly public firms, we document that the probability of CEO (CFO) turnover in the wake of an accounting irregularity is lower (higher) when the firm's CEO is also a founder. The difference in CEO turnover rates is dramatic, with non-founder CEOs turning over at a rate of 49 percent, as compared to only 29 percent for founder CEOs. Our overall findings are consistent with the notion that the board's response to irregularities differs when the CEO is a founder.

Original languageEnglish (US)
Pages (from-to)287-314
Number of pages28
JournalAccounting Review
Volume85
Issue number1
DOIs
StatePublished - Jan 1 2010

Keywords

  • Entrenchment
  • Founders
  • IPO
  • Restatements
  • Turnover

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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