The Effect Of Chief Executive Officers Turnover On International Financial Reporting Standards Reconciliation

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Eun Sil Choi
Chang Seop Rhee


IFRS Reconciliation, CEO Turnover, Corporate Governance


We investigate the impact of Chief Executive Officer (CEO) changes on International Financial Reporting Standards (IFRS) reconciliation. Since January 1st, 2011 all Korean listed companies are required to adopt IFRS in their separate and consolidated accounts. To aid investors in evaluating corporate performance over time, the companies must restate the K-GAAP financial statements for 2010 under IFRS. We find that negative IFRS reconciliation is more frequent for firms with CEO turnover in 2011. The result suggests that new CEOs have an incentive to report lower earnings through IFRS reconciliation for the purpose of big bath. Additionally, in order to examine whether new CEOs’ incentive of the negative IFRS reconciliation is existed in different corporate governance levels, we classify the companies into strong and weak corporate governance. From the test, we find that their incentive of negative IFRS reconciliation is disappeared (existed) in the companies with strong (weak) corporate governance.


This study will contribute to academics and disclosure-related practitioners by providing valuable information of the CEO incentive regarding IFRS reconciliation. We believe that our empirical evidence will be helpful to market participants when they make a business decisions in case of CEO turnover.


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