scholarly journals CEO turnover in public and private organizations: analysis of the relevance of different performance horizons

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Esteban Lafuente ◽  
Miguel A. García-Cestona
Keyword(s):  
Path Dependency ◽  
Ceo Turnover ◽  
Private Firms ◽  
Turnover Rates ◽  
Short Term ◽  
Past Performance ◽  
Public And Private ◽  
Content Type ◽  
Public Firms ◽  
Going Private

PurposeThis paper investigates how past performance changes, prior CEO replacements and changes in the chairperson impact CEO turnover in public and large private businesses.Design/methodology/approachWe analyze 1,679 CEO replacements documented in a sample of 1,493 Spanish public and private firms during 1998–2004 by computing dynamic binary choice models that control for endogeneity in CEO turnovers.FindingsThe results reveal that different performance horizons (short- and long-term) explain the dissimilar rate of CEO turnover between public and private firms. Private firms exercise monitoring patience and path dependency characterizes the evaluation of CEOs, while public companies' short-termism leads to higher CEO turnover rates as a reaction to poor short-term economic results, and alternative controls—ownership and changes in the chairperson—improve the monitoring of management.Originality/valueOur results show the importance of controlling for path dependency to examine more accurately top executives' performance. The findings confirm that exposure to market controls affects the functioning of internal controls in evaluating CEOs and shows a short-term performance horizon that could be behind the recent moves of public firms going private or restraining shareholders' power.

scholarly journals CEO Turnover–Performance Sensitivity in Private Firms

2017 ◽  
Vol 52 (2) ◽  
pp. 583-611 ◽  
Author(s):  
Huasheng Gao ◽  
Jarrad Harford ◽  
Kai Li
Keyword(s):  
Chief Executive ◽  
Ceo Turnover ◽  
Private Firms ◽  
Board Structure ◽  
Turnover Rates ◽  
Public And Private ◽  
Public Firms ◽  
Performance Improvements ◽  
Performance Sensitivity ◽  
Quality Of Accounting Information

We compare chief executive officer (CEO) turnover in public and large private firms. Public firms have higher turnover rates and exhibit greater turnover–performance sensitivity (TPS) than private firms. When we control for pre-turnover performance, performance improvements are greater for private firms than for public firms. We investigate whether these differences are due to differences in quality of accounting information, the CEO candidate pool, CEO power, board structure, ownership structure, investor horizon, or certain unobservable differences between public and private firms. One factor contributing to public firms’ higher turnover rates and greater TPS appears to be investor myopia.

Real earnings management in public vs private firms in the GCC countries: a risk perspective

2017 ◽  
Vol 18 (2) ◽  
pp. 242-260 ◽  
Author(s):  
Khalid Al-Amri ◽  
Saif Al Shidi ◽  
Munther Al Busaidi ◽  
Serkan Akguc
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Private Firms ◽  
Flow Management ◽  
Public And Private ◽  
Content Type ◽  
Public Firms ◽  
Cash Flow Management ◽  
Gcc Countries ◽  
Private And Public

Purpose The purpose of this paper is to examine the use of real earnings management by private and public firms in a unique institutional setting, which is the Gulf Cooperation Council (GCC) countries. The paper also compares the level of real earnings management between public and private firms in the GCC area. Design/methodology/approach The GCC area is a unique setting to investigate the use of real earnings management because of the low enforcement of reporting standards and supervisory rules, lack of sophisticated financial analysis, specialized media tools and high concentration of capital ownership. The authors use different models of real earnings management proposed by Roychowdhury, 2006, cash flow management, productions cost management and discretionary expenses management to examine the use of real earnings management. Findings The paper documents evidence consistent with private and public firms using real earnings management to influence their earnings figures. The paper also shows that the level of real earnings management is higher for private firms compared to public firms when cash flow management and discretionary expenses management models are used. The production cost model results show evidence consistent with public firms only engaging in real earnings management through production cost reduction. Research limitations/implications The results of this study might not be applicable to other emerging markets. Practical implications The findings of this study should promote a general understanding of firms’ behavior in unique environment such as GCC countries. Regulators in the GCC region should be aware that real earnings management techniques have been used by firms and that extra caution is required when auditing or analyzing the financial information of private and public firms in the GCC market. Originality/value This paper contributes to the literature in many aspects. First, it provides additional evidence on the use of earnings management in unique market contexts outside the USA and Europe. The GCC markets share many common characteristics that make them interesting settings to be investigated. Second, this paper adds more evidence on the use of earnings management between public and private firms. In this regard, the paper adds additional evidence in the discussions proposed by Ball and Shivakumar (2005) and Givoly et al. (2010) who use two competing perspectives to investigate earnings quality in public and private firms: the demand hypothesis and the opportunistic behavior hypothesis.

Public versus Private Firm Responses to the Tax Rate Reduction in China

2013 ◽  
Vol 36 (1) ◽  
pp. 137-163 ◽  
Author(s):  
Kenny Z. Lin ◽  
Lillian F. Mills ◽  
Fang Zhang
Keyword(s):  
Private Firm ◽  
Private Firms ◽  
Rate Reduction ◽  
Short Term ◽  
Public And Private ◽  
Tax Rate ◽  
Public Firms ◽  
Public Versus Private ◽  
Statutory Tax Rate ◽  
Firm Responses

ABSTRACT This study examines how public and private firms in China respond to the 2008 statutory tax rate reduction from 33 percent to 25 percent. Using a proprietary dataset of private firms, we find that private firms report significantly more income-decreasing current accruals than do public firms in 2007, the year prior to the tax rate reduction. These negative accruals were substantial and material, both compared with public firms and compared with 2008 accruals. By shifting their taxable income from a high- to a low-tax year, private firms save about 8.58 percent of their total tax expenses in 2007. Our results suggest that countries contemplating tax rate changes should expect material inter-temporal income shifting by private firms when they predict the short-term effects of changes in the tax rate on revenue. JEL Classifications: H25; M41.

scholarly journals Innovation Strategy of Private Firms

2017 ◽  
Vol 53 (1) ◽  
pp. 1-32 ◽  
Author(s):  
Huasheng Gao ◽  
Po-Hsuan Hsu ◽  
Kai Li
Keyword(s):  
New Technology ◽  
Equity Markets ◽  
Life Cycles ◽  
Innovation Strategy ◽  
Private Firms ◽  
Investment Horizon ◽  
Public And Private ◽  
Public Firms ◽  
Innovation Strategies ◽  
Public Equity

We compare innovation strategies of public and private firms based on a large sample over the period 1997–2008. We find that public firms’ patents rely more on existing knowledge, are more exploitative, and are less likely in new technology classes, while private firms’ patents are broader in scope and more exploratory. We investigate whether these strategies are due to differences in firm information environments, CEO risk preferences, firm life cycles, corporate acquisition policies, or investment horizons between these two groups of firms. Our evidence suggests that the shorter investment horizon associated with public equity markets is a key explanatory factor.

Czech vote may raise chances of new ANO-led government

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Household Consumption ◽  
Capacity Constraints ◽  
Consumer Confidence ◽  
Structural Reforms ◽  
Medium Term ◽  
Short Term ◽  
Public And Private ◽  
Content Type

Significance Now that Zeman has successfully retaken the presidency with 152,000 more votes than his pro-Western rival Jiri Drahos after a campaign that was dominated by domestic issues, attention will focus once again on forming a majority government after the largest parliamentary party, ANO 2011, lost a vote of confidence on January 16. Impacts Consumer confidence may strengthen in the short term as the old ANO-CSSD government’s policies take effect, providing an economic boost. Robust household consumption and public- and private-backed investment may also contribute to stronger GDP this year. Although monetary policy is set to tighten, in response to signs of overheating, interest rates will remain at historic lows. The outlook for the economy in the short term is upbeat, with a strong outturn expected for the fourth quarter of 2017. Structural reforms will be required over the medium term to reduce the risk of capacity constraints, especially in industry.

Accounting Irregularities and Executive Turnover in Founder-Managed Firms

2010 ◽  
Vol 85 (1) ◽  
pp. 287-314 ◽  
Author(s):  
Andrew J. Leone ◽  
Michelle Liu
Keyword(s):  
Control Sample ◽  
Ceo Turnover ◽  
Executive Turnover ◽  
Turnover Rates ◽  
Public Firms ◽  
The Difference

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 nonfounder 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.

scholarly journals Insights into food system exposure, coping capacity and adaptive capacity

2017 ◽  
Vol 119 (12) ◽  
pp. 2851-2862 ◽  
Author(s):  
Ari Paloviita ◽  
Teea Kortetmäki ◽  
Antti Puupponen ◽  
Tiina Silvasti
Keyword(s):  
Adaptive Capacity ◽  
Food System ◽  
Structured Interviews ◽  
Short Term ◽  
Public And Private ◽  
Coping Capacity ◽  
Content Type ◽  
Coping Responses ◽  
Multiple Structure ◽  
System Vulnerability

Purpose The purpose of this paper is to consider the concepts of exposure, coping capacity and adaptive capacity as a multiple structure of vulnerability in order to distinguish and interpret short-term coping responses and long-term strategic responses to food system vulnerability. Design/methodology/approach This paper applies an abductive approach for qualitative analysis of data, which were collected through 18 semi-structured interviews among Finnish food system actors. Findings The findings suggest that coping capacity and adaptive capacity are indeed two different concepts, which both need to be addressed in the examination of food system vulnerability. Public and private food system governance and related decision-making processes seem to focus on building short-term coping capacity rather than strategic adaptive capacity. In fact, conservative and protective policies can be counterproductive in terms of building genuine adaptive capacity in the food system, highlighting institutional and policy failures as limiting adaptive capacity and affecting future vulnerability. Originality/value This paper is the first to provide evidence on the multiple structure of food system vulnerability. It simultaneously considers the external aspect (vulnerability drivers) and internal factors, including short term coping capacity and more strategic adaptive capacity, as key determinants of vulnerability.

Returns to acquirers of listed and unlisted targets: an empirical study of Australian bidders

2017 ◽  
Vol 34 (1) ◽  
pp. 24-48 ◽  
Author(s):  
Pascal Nguyen ◽  
Nahid Rahman ◽  
Ruoyun Zhao
Keyword(s):  
Global Financial Crisis ◽  
Abnormal Returns ◽  
Search Costs ◽  
Private Firms ◽  
Content Type ◽  
Public Firms ◽  
Listed Firms ◽  
Wide Range ◽  
Country Characteristics ◽  
Private And Public

Purpose This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms. Design/methodology/approach The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status. Findings The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis. Research limitations/implications The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics. Practical implications The results support the view that market frictions contribute to make private firms attractive targets. Originality/value The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

A Property Rights Analysis of Newly Private Firms: Opportunities for Owners to Appropriate Rents and Partition Residual Risks

2011 ◽  
Vol 21 (3) ◽  
pp. 445-471 ◽  
Author(s):  
Marguerite Schneider ◽  
Alix Valenti
Keyword(s):  
Property Rights ◽  
Shareholder Value ◽  
Private Firm ◽  
Residual Risk ◽  
Private Firms ◽  
Public Firms ◽  
Going Private ◽  
Key Factor ◽  
Owned Company ◽  
Do So

ABSTRACT:A key factor in the decision to convert a publicly owned company to private status is the expectation that value will be created, providing the firm with rent. These rents have implications regarding the property rights of the firm’s capital-contributing constituencies. We identify and analyze the types of rent associated with the newly private firm. Compared to public firms, going private allows owners the potential to partition part of the residual risk to bond holders and employees, rendering them to be co-residual risk bearers with owners. We propose that new promotion-based contracts with bond holders and employees, reflecting their particular investments, be negotiated as the firm migrates from public to private status. These contracts should acknowledge the firm’s intent to maximize shareholder value and its need to take the risks necessary to do so, but support that the firm’s survival not be undermined due to its possibly opportunistic owners.

Do Public and Private Firms Behave Differently? An Examination of Investment in the Chemical Industry

2019 ◽  
Vol 55 (8) ◽  
pp. 2530-2554 ◽  
Author(s):  
Albert Sheen
Keyword(s):  
Chemical Industry ◽  
Agency Problems ◽  
Private Firms ◽  
Demand Shock ◽  
Public And Private ◽  
Public Firms ◽  
Commodity Chemicals ◽  
Public Firm ◽  
And Control ◽  
The U.S

I compare the U.S. capacity expansion decisions of public and private producers of 7 commodity chemicals from 1989 to 2006. I find that private firms invest differently than public firms. Private firms are more likely than public firms to increase capacity prior to a positive demand shock (an increase in price and quantity) and less likely to increase capacity before a negative demand shock. Potential mechanisms include public firm overextrapolation of past demand shocks and agency problems arising from greater separation between ownership and control.

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