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SUMMARY:The Contract Year Phenomenon in the Corner Office: An Analysis of 
 Firm Behavior During CEO Contract Renewals
DTSTART:20150526T140000
DTEND:20150526T153000
DTSTAMP:20260527T190503Z
UID:d0e7804feb468fd5eec80109d45bbd922920f5b66b54c0d9dcdf476e
CATEGORIES:Conferences - Seminars
DESCRIPTION:Yuhai XUAN (Harvard Business School)\nThis paper investigates 
 how executive employment contracts influence corporate financial policies 
 during the final year of the contract term\, using a new\, hand-collected 
 data set of CEO employment agreements. On the one hand\, the impending exp
 iration of fixed-term employment contracts creates incentives for CEOs to 
 engage in strategic window-dressing activities. We find that\, compared to
  normal periods\, CEOs manage earnings more aggressively when they are in 
 the process of contract renegotiations. Correspondingly\, during CEO contr
 act renewal times\, firms are more likely to report earnings that meet or 
 narrowly beat analyst consensus forecasts. Moreover\, CEOs also reduce the
  amount of negative firm news released during their contract negotiation y
 ears. On the other hand\, we find that merger and acquisition deals announ
 ced during the contract renegotiation year yield higher announcement retur
 ns than deals announced during other periods\, suggesting that the upcomin
 g contract expiration and renewal can also have disciplinary effects on po
 tential value-destroying behaviors of CEOs. In addition\, we show that fir
 ms whose CEOs are not subject to contract renewal pressure do not experien
 ce such corporate policy changes and that CEOs who engage in manipulation 
 during contract renewal obtain better employment terms in their new contra
 cts\, in terms of contract length\, severance payment\, and salary and bon
 us. Overall\, our results indicate that job uncertainty created by expirin
 g employment contracts induces changes in managerial behaviors that have s
 ignificant impacts on firm financial activities and outcomes.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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