CEO and CFO career consequences to missing quarterly earnings benchmarks
By: Rick Mergenthaler, Shiva Rajgopal, Suraj Srinivasan
Contributors: Rajgopal, Shiva; Srinivasan, Suraj; Harvard Business School
Series: Working paper / Harvard Business School -- 09-014; Working paper (Harvard Business School) -- 09-014
Publisher: Harvard Business School
Published: 2008
Place of publication: Boston
Language: eng
Number of pages: 61
Description: We find that missing quarterly earnings benchmarks, especially the analyst consensus earnings number, is associated with career penalties in the form of a reduced bonus, smaller equity grants, and a greater chance of forced dismissal for both CEOs and CFOs during the period 1993-2004. These results are obtained after controlling for the magnitude of the earnings surprise, operating and stock return performance, and are significant in a statistical and in an economic sense. Career penalties for failing to meet the analyst consensus estimate are higher for firms that give quarterly earnings guidance and in the post-SOX period. Our evidence suggests that (i) boards appear to react directly to managers' ability to meet earnings targets or to the information that is reflected in meeting such benchmarks; and (ii) senior managers' preoccupation with meeting earnings benchmarks might be based at least partly on career concerns.
Notes: "August 2008"--Publisher's web site.

Includes bibliographical references.