Prior research reports that analysts focus on street earnings, which are measures that typically
exceed GAAP earnings. Using a sample of CEO turnovers from 1993–2016 we show that the
likelihood and speed of forced CEO turnover - but not voluntary turnover - are higher when
analysts exclude income-decreasing items. The association ...
Prior research reports that analysts focus on street earnings, which are measures that typically
exceed GAAP earnings. Using a sample of CEO turnovers from 1993–2016 we show that the
likelihood and speed of forced CEO turnover - but not voluntary turnover - are higher when
analysts exclude income-decreasing items. The association between exclusions and forced
turnovers is particularly pronounced for high magnitude exclusions. We also show that greater
street exclusion of income-decreasing items, the lower CEO bonus payouts. We find that
boards use audited and more conservative GAAP earnings in evaluating and dismissing CEOs,
except in the recent period of 2010-2016.