Short Tenure Research Articles

Does Auditor Rotation Increase Auditor Independence?

This study aims to empirically test the effects of auditor rotation and auditor tenure on an auditor’s independence in companies listed on the Indonesia Stock Exchange during the years 2002-2010. This study using logistic regression estimation technique. The results show that, statistically, the auditor’s tenure has significant negative effects on the auditor’s independence, measured by the tendency to give a ‘going concern’ opinion. Furthermore, the results also show significant differences between the effects of short and long term tenures on the auditors’ independence. Auditor rotation has significant positive effects on the auditors’ independence.

Firms’ Financial Performance and Corporate Board Diversity: Evidence from Kenya **

Boards’ affects performance through their monitoring and advising functions. The ability to perform these functions depends on among other things, the experience of the board. This paper examines the effects of corporate board experience on firms’ financial performance of listed companies in the Nairobi Securities Exchange for the period 2001-2010 using System GMM. Performance variables are ROA, Tobin’s Q ratio, share price and price to book value. Experience is measured as stock of initial experience and tenure in a particular board. Tenure is found to be positively and significantly associated with the performance variables. Tenure ^2 captures the entrenchment behavior of the board. This entrenchment effect has a significantly negative effect on performance. This negative effect eventually outweighs the positive tenure effect and gives rise to the downward effect of tenure on performance hence the inverted U-relationship between tenure and performance. The study reports an optimal tenure of between 7 and 8 years depending on the performance variable being considered. At shorter tenure; there is a positive effect on performance, but at a longer tenure, entrenchment behavior of the veteran board members outweighs the monitoring effect. In fact these long tenured boards become ‘zombie boards’, thus negatively affecting performance. Stock of initial experience consists of education, and past managerial experience. It has a significant positiverelationship with performance.

Coping with Work Stress in Police Employees

Present study endeavored to investigate the role of coping in work stress of police employees. A 3 × 2 factorial design with three levels of job hierarchy (officers, sub-inspectors, and constables) and two levels of job tenure [short job tenure (0–10 year) and long job tenure (above 10 year)] was used in present study. A total of 240 police personnel from Gorakhpur Zone (India) participated as respondents. Objective Work Stress Scale, Feeling of Work Stress Scale (Cooper 1983), and Coping Scale (Carver et al. 1989) were used to determine the level of work stress and coping of the police employees. ANOVA results revealed that the level of work stress varied across different groups of police personnel. More specifically, objective work stress was found greater in sub-inspectors than constables and officers while constables reported more feeling of work stress than sub-inspectors and officers, respectively. Furthermore, the different groups of police personnel differed on various forms of coping response, in which officers used more active- and adaptive-related coping strategies than sub-inspectors and constables, respectively. Contrary to this, constables used more maladaptive coping strategies than sub-inspectors and officers. Correlation results evinced that active- and adaptive-related coping responses have an inverse link with work stress, whereas maladaptive coping responses have a positive relationship with work stress. Findings have been discussed in the light of organizational and personal factors.

CEO Career Concerns And Voluntary Disclosure

This paper investigates the relation between Chief Executive Officers (CEO) career concerns and voluntary disclosures using listed firm (KOSPI) data in Korea. Prior research suggests that explicit incentives in the form of CEO stock-based compensation or CEO’s equity ownership mitigate the agency problems of reluctance to make voluntary disclosure. In addition, implicit incentives arising from CEO career concerns are as important as explicit incentives for mitigating agency problems.The labor market assesses CEOs ability and CEO reputation in the market is a valuable asset that is associated with many long-term benefits, such as better future compensation, reappointment in the position, and greater managerial autonomy. CEOs are concerned about such an assessment and these concerns are referred to as career concerns. However, the market has incomplete information about CEOs’ ability especially when the CEOs have short tenures as a CEO position. Hence, CEOs with short tenures have more strong incentives to signal their ability to the labor market so that they can build proper reputation.Implicit incentives arising from CEO career concerns are measured by CEO tenure. I assume that short-tenured CEOs are more career-concerned than long-tenured CEOs. I find that CEOs with short tenures tend to more likely disclose management forecasts. I interpret this result that more career-concerned CEOs have strong incentives to signal their ability to the labor market in order to build their reputations which affect their future payoffs such as compensations and reappointment. In addition, management forecasts, means of voluntary disclosure, are used as effective mechanism. I also find that CEOs with short tenures tend to disclose more accurate management forecasts. This result implies that CEOs with more career concerns have more pressure to provide accurate forecasts because of their reliability in the labor market. Based on these empirical results, I infer that CEOs’ implicit incentives affect their voluntary disclosure decision.This study will contribute to academics and disclosure-related practitioners by documenting about CEOs’ career concerns and their voluntary disclosure decisions.

Does Demographic Dissimilarity Matter for Perceived Inclusion? Evidence From Public Sector Employees

This study examines the relationship between individual dissimilarity and perceptions of organizational inclusion. Data from a national survey of public agencies conducted in Florida and Texas show that gender dissimilarity is negatively associated with perceptions of inclusion and the negative relationship is more acute for men than for women. In contrast, tenure dissimilarity is positively related to perceptions of inclusion and this positive association is more acute for those with longer tenure than for those with shorter tenure. These results suggest that the effect of dissimilarity on the perception of inclusion depends on both the observability of individual-level characteristics and the status of the demographic group. In particular, dissimilarity along characteristics that are easily observable (such as gender) is more likely to influence perceptions of inclusion and dissimilarity is more influential for higher status groups (such as men or long-tenured employees).

How Do Plural-Sourcing Firms Make and Buy? The Impact of Supplier Portfolio Design

This paper uses the notion of contracting strategy to advance research on plural sourcing. We develop and test a theoretical framework to explain how plural-sourcing firms strike the make-and-buy balance depending on their contracting strategy. The focal firm’s choice of a contracting strategy is associated with a specific supplier portfolio design, with a bargaining-based strategy resulting in many, narrowly capable suppliers with short tenure, and a relationship-based contracting strategy resulting in fewer, broadly capable suppliers with long tenure. Focal firms with the latter strategy incur lower overall contracting costs than those with the former, and therefore outsource more. Focal firms seek to influence contracting costs associated with their supplier portfolio for “nearly the same inputs” and “nearly the same suppliers.” Empirical analysis corresponding to the two levels, namely patent prosecution and legal services at Fortune 500 firms, provide consistent support for our theory.

The Selection of an Interim CEO

More and more boards are tapping interim CEOs to temporarily fill the corner office. Prior research indicates the negative performance implications of this decision; yet, little is known about the rationale behind this decision. Our aim is to fill this research gap. Drawing on agency and human capabilities frameworks, we examined the contextual elements that influence a board’s decision to pursue temporary leadership. Within a sample of 375 successions occurring between 1998 and 2005, we found that boards of directors were more likely to select interim CEOs under certain succession conditions, namely, when the prior CEO was forced out and there was no heir apparent or when the prior CEO had served for a short tenure. Our results highlight the importance of context in succession selections and provide insights into why a board would pursue a decision with seemingly negative repercussions. Implications for theory and practice are discussed.

The determinants of IPO-related shareholder litigation: The role of CEO equity incentives and corporate governance

We examine how compensation and corporate governance mechanisms affect the occurrence of securities fraud and related shareholder litigation for initial public offering (IPO) firms. While prior research has focused on seasoned firms, we examine how CEO incentives and corporate governance in IPOs affect the incidence of IPO-related shareholder litigation. We find that the likelihood of securities fraud allegations increases with pre-IPO CEO equity incentives, suggesting a “dark side” to executive equity incentives. The risk of being sued is higher for firms whose boards are dominated by insiders, whose CEOs are older, have shorter tenure, or who founded the firm.

Can on-the-job training stabilize employment among rural migrant workers?

Purpose Whether training contributes to stabilizing employment among rural migrant workers in cities remains unclear. Based on this gap in the research, the purpose of this paper is to examine how on-the-job training affects rural migrant workers’ job mobility in China. Design/methodology/approach By using randomly sampled survey data on migrant workers in Liaoning province in 2014, the authors applied a logistic model and survival analysis to explore the effect of on-the-job training on migrant workers’ job turnover and understand workers’ job change behaviour after receiving on-the-job training. Findings The results showed that job training provided by employers can significantly reduce migrant workers’ turnover by increasing specific human capital. By contrast, training provided by the government or migrant workers themselves focuses on increasing general human capital and thus fails to reduce job turnover. Moreover, further discussion revealed that, in the trained group, those people with a short tenure and low wage in the first job, people without any skills before migration, male migrant workers, and people that work in medium-sized and large cities have a higher probability of changing jobs. These findings suggest that to tackle the high rate of job mobility among rural migrant workers, firms should entice this labour to train by adjusting their internal training mechanisms, and local governments should subsidize firms that provide on-the-job training for rural migrant workers to help share the costs and risks of training. Moreover, for sake of reducing job changing among those trained workers, firms even should take actions to protect their labour rights of migrant workers and to ensure that they receive equal treatment to their urban counterparts. Originality/value This paper makes three contributions to the field of job mobility in China. First, it explores the mechanism between on-the-job training and rural migrant workers’ job mobility. Second, it empirically analyses the effect of on-the-job training on migrant workers’ job mobility as well as the different effects of general and specific training. Lastly, its results have important policy implications for the employment stability of rural migrant workers.

Directorss Career Concerns: Evidence from Proxy Contests and Board Interlocks

This paper studies the disciplinary spillover effects of proxy contests on companies that share directors with target firms, that is, interlocked firms. In difference-in-differences tests, I find that interlocked firms reduce excess cash holdings, increase shareholder payouts, cut CEO compensation, and engage in less earnings management in the year after proxy contests. The effects are more pronounced when both the interlocked and target firms have a unitary board and when the interlocking director is up for election, is younger, or has shorter tenure. Overall, the evidence highlights the importance of directors’ career concerns in policy spillovers across firms with board interlocks.

The Determinants and Performance Impact of Outside Board Leadership

Outside board chairs are more likely in firms that are smaller, have greater stock volatility and research and development intensity, and have a lower proportion of inside directors and less institutional ownership; they are also more likely when chief executive officers have shorter tenure and lower ownership. We also find that the existence of an outside chair is associated with geographical and industry norms. An outside chair is positively associated with firm performance, a finding robust to various estimation methods, including event study and multivariate analyses incorporating controls for endogeneity, as well as market and accounting measures of performance. We note, however, that the relationship between outside chair and firm performance varies with firm characteristics.

The Determinants of IPO-Related Shareholder Litigation: The Role of CEO Equity Incentives and Corporate Governance

This paper examines how compensation and corporate governance mechanisms affect the occurrence of securities fraud and related shareholder litigation for young IPO firms. While prior research has focused on seasoned firms, we examine how CEO incentives and corporate governance in IPO firms affect the incidence of IPO-related shareholder litigation. We find that the likelihood of securities fraud allegations increases with pre-IPO CEO equity incentives, suggesting a “dark side” to executive equity incentives. Additionally, we find that the risk of being sued is higher for firms whose boards are dominated by insiders, whose CEOs are older, have shorter tenure, or who founded the firm.

Reflections

Reflections

Stock Splits, Accounting Manipulation, and Unwarranted CEO Compensation

We investigate managerial opportunistic behavior and find that hundreds of firms use forward stock splits in conjunction with accruals management and real activities management to falsely signal bright prospects in schemes that help executives justify an average 34% increase in their salaries. While encouraging lay investors to buy the stocks with a stock split signal, insiders themselves reduce their own stakes, reflecting negative personal beliefs about firms’ prospects. Insider stock sales, accounting restatements, short CEO tenure, and reverse splits indicate the manipulative intent in these stock split announcements.

Explaining Japan’s Revolving Door Premiership: Applying the Leadership Capital Index

The tenure of Japanese prime ministers is famously short. Between 2006 and 2012 Japan changed prime minister once a year. What factors can explain Japan’s revolving-door premiership? To explore this puzzle, this article applies the <em>Leadership Capital Index</em> (LCI) developed by Bennister, ’t Hart and Worthy (2015) to case studies of the nine Japanese prime ministers holding office between 2000 and 2015. Leadership capital is the aggregate of leaders’ political resources: skills, relations and reputation. The LCI thus allows analysis of the interplay between individual capacities and contextual conditions in determining leaders’ ability to gain, maintain and deploy power. The LCI is applied to answer two questions. Firstly, what accounts for the short tenure of many Japanese premiers? In which of the LCI’s three leadership dimensions do Japanese leaders lack capital? Secondly, what forms of capital allow some prime ministers to retain office for longer than average (>2 years)? In particular, the article analyses the leadership of Junichiro Koizumi (2001–2006) Japan’s longest serving prime minister since the 1970s, and incumbent Prime Minister Shinzo Abe, who has held office for three years since December 2012. As well as utilising the LCI to comparatively analyse the tenure of Japan’s prime ministers, this article tests the applicability of the Index beyond Western parliamentary democracies.

Moving Towards a Single Labour Contract: Transition vs. Steady-State

This paper analyses the optimal design of a single open-ended contract (SOEC) and studies the political economy of moving towards such a SOEC in a labour market where employment protection is highly discontinuous. We develop a computationally tractable approach to compare two economic environments: one with a large employment protection gap after a short tenure, and another one with a SOEC featuring a smooth tenure profile. For illustrative purposes, we specialise the discussion of such choices to Spain, a country often considered as an epitome of a labour market with dual employment protection. We show that a SOEC has the potential of bringing substantial improvements in equilibrium allocations and welfare. We provide estimates for the eligibility rule and tenure profile of the optimal SOEC, defined as the contract maximising the steady-state lifetime utility of new labour-market entrants. Finally, we use the model to identify winners and losers among younger and older workers in the transitional path of such a reform, and evaluate its political support.

Goodwill Impairment: An Examination of Chief Executive Officer Tenure in Malaysia

Accounting for purchased goodwill has changed from amortisation to impairment approach.The standard setters argue that the impairment-only approach will better reflect the underlying economic attributes of goodwill.However, due to the great subjectivity involved in fair values estimate, the impairment approach is susceptible to manipulation. We examine the influence of chief executive officer (CEO) tenure on the amount of goodwill impairment for a sample of 727 companies listed on Bursa Malaysia from years 2011 to 2012. Our empirical results are contradictory to previous research findings that CEOs with shorter tenure are insignificantly associated with magnitude of goodwill impairment. Further analysis reveals that new CEOs are associated with a greater magnitude of impairments only when earnings are positive.The result is consistent with the premise of new CEOs involving in income smoothing, where the incentives to expense goodwill is greatest for profitable firms.

Do Employees Leave Just Because They Can? Examining the Perceived Employability–Turnover Intentions Relationship

ABSTRACTThe relationship between perceived employability and turnover intentions seems much more complicated than what the common sense would suggest. Based on the reviewed literature, it was expected that job satisfaction, affective commitment, and perceived job security would moderate this relationship. Using a sample of working individuals from different occupations and sectors (N = 721), it was found that employees who perceived themselves as highly employable were more likely to have turnover intentions when their affective commitment was low and perceived job security was high; and the relationship was negative for employees with shorter tenures. Understanding the conditions under which perceived employability is associated with turnover intentions may help organizations design human resource policies that allow them to retain an educated and competent workforce.

The Loyalty-Competence Trade-Off in Dictatorships and Outside Options for Subordinates

Why do dictators sometimes prefer incompetent subordinates? I explore this question using a formal model. In each period of a dynamic game, a subordinate chooses his level of loyalty, which determines the dictator’s survival probability. He also performs another task—such as carrying out economic policy. The dictator’s decision each period is whether to hire a subordinate who is competent or incompetent at that task. An unemployed subordinate may be hired in the future, when the current dictator is removed from office. I show that less competent subordinates will be more loyal. As a result, dictators who value performance at economic tasks will hire more competent subordinates and will have shorter tenures. Incompetent subordinates will be hired more often if the dictators discount future payoffs less heavily or if the payoff from competence is smaller. The results show that, consistent with observation, longer tenures will not be associated with better economic performance.

Auditor Tenure and Financial Reporting Fraud: Pre and Post Sarbanes-Oxley Act of 2002

We use a comprehensive and unique fraud database from the Institute for Fraud Prevention (IFP) to test the relationship between audit firm tenure and fraudulent financial reporting pre and post Sarbanes Oxley Act of 2002 (SOX 2002). Overall, short tenure is only marginally related to the likelihood of fraud. Also, only tenure of nine years or more is positively associated with the likelihood of fraud. We also find that compared with other audit firms, the Big-N are less likely to be associated with fraud, while client size is marginally positively associated with fraud, possibly reflecting larger clients’ bargaining power with auditors in contentious audit situations (c.f., Nelson et al. 2002). The results hold for the pre-SOX period but not for the post SOX period.