Journal of Management & Governance

, Volume 11, Issue 1, pp 45-60

First online:

The influence of executive age, career horizon and incentives on pre-turnover earnings management

  • Wallace N. DavidsonIIIAffiliated withFinance Department, Southern Illinois University Email author 
  • , Biao XieAffiliated withFinance Department, College of Business Administration, Southern Illinois University at Carbondale
  • , Weihong XuAffiliated withDepartment of Accounting & Law, State University of New York at Buffalo
  • , Yixi NingAffiliated withSchool of Business Administration, University of Houston – Victoria

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In this paper we hypothesize that CEOs will be motivated to manage earnings prior to a turnover decision. This motivation comes from the horizon problem for CEOs nearing retirement age and for CEOs whose profit-based bonus is a large portion of their total compensation. We find that firms in which CEOs are nearing retirement age have large discretionary accruals in the year prior to turnover. Although we find firms with a larger proportion of profit-based bonus pay have larger discretionary accruals, this result is not robust with the inclusion of control variables in the regressions.