Research On The Impact Of Top Management Change On Earnings Persistence

Executives are an important human capital in the company.A large body of literature indicates that company executives are inextricably linked to the persistence of earnings.According to the nature of the business activities that generate surplus,we can divide the current surplus into temporary surplus and permanent surplus.The larger the proportion of business activities can continue to generate surplus in the future,the better the surplus sustainability.In the future,the permanent surplus will continue to be conditional,that is,the state of the enterprise should ensure that these operations are functioning properly.Executives represent the soul of the company.The change of executives is a huge personnel earthquake for the company,which will greatly affect the company.Will the process of executive change affect the business activities that were originally permanent surpluses?Normal operation,that is,whether it will affect the sustainability of earnings is worth exploring.First of all,this paper reviews and summarizes the literature on executive change and earnings persistence.Then,identifies company executives as the company's chairman and general manager(CEO),and determines the indicators for measuring earnings.Followed by using classic first-order autoregressive model and basing on A-share manufacturing companies from 2009 to 2016,studied the impact of executive changes on earnings sustainability.At last,group regression is used to further study the impact of executive power,executive tenure,executive departure reasons,and successor sources on executive change and earnings persistence.The empirical study found that executive change will reduce the company's earnings continuity.Further research found that the greater the power of departing executives,the greater the negative impact on the sustainability of earnings.The unconventional reason for the departure of executives has a greater negative impact on the persistence of earnings than the conventional reasons.Successive executives from within the company rather than outside can significantly mitigate the negative impact of executive change on earnings sustainability.There is no significant difference in the extent to which executives who have different lengths of time have an impact on earnings persistence.The above research conclusions are still established after replacing the earnings sustainability indicator and only the robustness test such as the change of the chairman or the change of the general manager.This conclusion provides some inspiration for the company to face executive change decisions,and also provides empirical evidence for maintaining stable and sustained earnings from the perspective of executive change.