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Wilfrid Laurier University School of Business & Economics
September 18, 2014
 
 
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CPA/Laurier Centre for the Advancement of Accounting Research and Education

Earnings Surprises and Uncertain Managerial Ability: Earnings Surprises and Uncertain Managerial Ability


Shane S. Dikolli, Duke University William J. Mayew, Duke University Dhananjay Nanda, Duke University

published: 2008 | Research publication | CA Researc Centre Workshops

We document that the likelihood of CEO turnover increases in the number of past negative
quarterly earnings surprises, measured relative to both past earnings and analysts’ forecasts.
This relation declines over a CEO’s tenure, consistent with accounting earnings revealing
information about uncertain managerial ability. Further, CEO tenure affects firm governance
characteristics: tenure is positively associated with board independence, lack of CEO-chair
duality and CEO ownership. However, governance characteristics do not meaningfully affect the
earnings surprise-turnover relation. Results suggest that periodic earnings reports resolve
uncertainty about CEO ability, and tenure reflects uncertainty in CEO ability that affects firms’
monitoring choices.

Download: PDF (237k)    DMN_March_2008_0430.pdf

revised May 21/08

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