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December 16, 2015 Interim CEOs Are More Likely to Manipulate Earnings Interim CEOs engage in considerably more earnings manipulation than permanent successors, a study led by Guoli Chen of INSEAD finds. Based on a sample of 145 interim CEO successions in U.S. public firms from 2004 to 2008, the authors find that earnings management is 35.7% higher for interim CEOs than for the control group — and it pays off. They found that an interim CEO whose earnings management was one standard deviation (roughly 35 percentage points) above the sample mean had a 6.1% better chance of being promoted to a permanent position than someone at the mean. To create a good impression on key stakeholders, interim CEOs may resort to earnings management to make the firm’s performance appear better, the authors write. Source: Passing Probation: Earnings Management by Interim CEOs and Its Effect on Their Promotion Prospects

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