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Long horizon institutional investors and the relation between missing quarterly analyst forecasts and CEO turnover

Long horizon institutional investors and the relation between missing quarterly analyst forecasts... PurposeThe purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark.Design/methodology/approachUsing a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast.FindingsAfter controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater.Research limitations/implicationsThe results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark.Originality/valueThis paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Accounting and Information Management Emerald Publishing

Long horizon institutional investors and the relation between missing quarterly analyst forecasts and CEO turnover

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1834-7649
DOI
10.1108/IJAIM-05-2017-0069
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark.Design/methodology/approachUsing a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast.FindingsAfter controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater.Research limitations/implicationsThe results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark.Originality/valueThis paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark.

Journal

International Journal of Accounting and Information ManagementEmerald Publishing

Published: May 7, 2019

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