Health Center Financial Check-Up: Prescriptions for Strengthening New York's Diagnostic and Treatment Centers

Analyzes evidence of financial distress among nonprofit health centers and contributing factors for individual centers as well as the sector. Makes recommendations for the state, philanthropic organizations, public and private payers, and health centers

Timely vs. Delayed CEO Resignation and Company Performance

This paper investigates changes in company performance following timely versus delayed CEO resignations after violations of financial wrongdoings. A resignation is considered timely if it is proactively pushed by the company, and delayed if it is driven by investigations initiated by SEC or other regulatory authorities. To date there are very few studies investigating the resignations of CEOs with financial wrongdoings and none that differentiate between timely versus delayed resignations. Our results show significant negative abnormal returns following announcement of CEO resignations. In addition, compared to timely resignations, the negative stock market reaction is larger and longer lasting for delayed resignations. This suggests that CEO resignations due to financial wrongdoings are not perceived as good news by investors, and the delayed resignations could make investors lose more confidence possibly because of worries about the ineffective corporate governance and supervision mechanism. Using a hand-collected dataset, this paper examines what factors may potentially influence the timeliness of CEO resignations and finds a significant negative correlation between CEO-chairman duality and the timeliness of CEO resignations. Moreover, this paper investigates the time-series patterns and within-firm differences in performance for up to three years around CEO resignations. Our results suggest a significant drop in the market-to-book ratio upon CEO resignations which coincides with findings of our event study

Does Writing Down Goodwill Imperil a CEO's Job?

We find that accounting charges for goodwill impairment provide meaningful signals to corporate boards concerning CEO performance in selecting and conducting acquisitions. We examine 5,990 firms that completed acquisitions and investigate the relation between CEO turnover and goodwill impairment during 2002–2016. The results show that the amount of goodwill impairment recognized prior to the departure is positively associated with forced, but not voluntary, CEO turnovers. Pre-turnover goodwill impairment is higher for firms with forced CEO turnovers than for firms with voluntary turnover. This implies that goodwill impairment provides information before CEO changes occur. We find only the unexpected component of goodwill impairment is informative and associated with forced CEO turnover. Results also show that the association between goodwill impairment and forced CEO turnover varies as the audit quality changes, suggesting the reliability of accounting information influences the board’s CEO retention decision

Does the Market Value CEO Styles?

We study how investors perceive the skill set that different types of CEOs bring into their companies. We compare CEOs who started their careers during a recession with other CEOs. We show that the announcement return around the appointment of a recession CEO is very significant and positive, and this positive market reaction is driven by cases where a recession CEO replaces a non-recession CEO. Our results indicate that the market assigns a positive and economically meaningful value to a recession CEO, suggesting that there is a limited supply of these types of CEOs in the executive labor market

Information Technology,Process Reengineering, and Performance Measurement: A Balanced Scorecard Analysis of Compaq Computer Corporation

The personal computer industry is characterized by fierce competition for market share. The pace of technological change results in ever-shorter product lives and a continuous search for enhanced efficiency. To achieve these goals, firms must use information technology insightfully to redesign business processes, improve supply chain management and increase the value provided to the customer. This competitive environment in the personal computer (PC) industry provides an exceptional laboratory for evaluating how companies use information technology to create business value. Compaq Computer Corporation is one of the most successful PC manufacturers. This case study, based on publicly available data, provides a comprehensive analysis of how strategic business use of information technology in concert with business process redesign improved the economic performance of this large-scale manufacturing company. Compaq has relied on strategic use of enterprise-wide IT to enhance its competitive position as the number one supplier of personal computers in the world. This analysis begins with a review of the economics and competitiveness of the PC industry, and the role of information technology. To place Compaq\u27s performance in perspective, we compare it to Dell Computer Company and Gateway Computer Company. We then profile the changes in Compaq\u27s business strategy and its use of process reengineering and enterprise-wide information technology to implement strategic changes. To understand Compaq\u27s financial success better, we use the Balanced Scorecard to develop a causal model of firm performance that highlights the contribution of information technology to four different dimensions of that performance. We conclude that 1) information technology, along with 2) process reengineering, when properly aligned with 3) Compaq\u27s business strategy contributed substantially to Compaq\u27s overall success and market leadership

Resolving the Troubled IT-Business Relationship from a Cultural Perspective

This research investigates the effects of the culture of the information technology (IT) group on the relationship between business and IT professionals within two Australian organisations, one a public sector organisation, and the other a private company. The IT groups in these two organisations had many similar themes of culture. Both organisations reported a troubled IT-business relationship. This research investigates the effects of the themes of IT culture that surfaced in each organisation on six essential ingredients of an effective IT-business relationship, providing some suggestions for management to consider to improve their troubled IT-business business relationship

The effects of ex-CEO’s board service and CEO change type on the association between CEO changes and goodwill impairments: Evidence from U.S. companies during 2002-2009

The purpose of this paper is to examine whether there is an association between CEO changes and goodwill impairments in U.S. companies during 2002-2009, and how ex-CEO’s board service and CEO change type affect this association. In 2001, the FASB introduced a new goodwill accounting standard SFAS 142, which allows goodwill to be tested for impairment instead of periodic amortization. To determine whether goodwill is impaired, managers estimate the fair value of goodwill, which is highly subjective in nature. Many researchers have raised concerns about this increased managerial discretion with regard to goodwill accounting. The highly subjective nature of goodwill impairment tests makes goodwill impairments an ideal earnings management tool for managers. Many prior studies document that new CEOs tend to record initial “earnings baths”, especially after CEO resignations. It is hypothesized that new CEOs use goodwill impairments in their baths, and that this is driven by CEO resignations. CEOs might resist the write-off of personally-acquired goodwill because the write-off could harm their reputation. It is further hypothesized that ex-CEO’s presence on the board prevents goodwill impairments by the new CEO. The topic of this paper is important because of goodwill’s increased importance in financial statements, substantial managerial discretion afforded by SFAS 142, and managerial incentives related to CEO changes. There is also little prior research on CEO’s board service. Data used in this study is obtained from Compustat database. This study focuses on years 2002-2009 because SFAS 142 was introduced in 2001, and data when CEOs have left their companies is stored until 2009 on Compustat. The final sample consists of 30,625 firm-year observations. Hypotheses of this paper are studied using both logistic and linear regression. Decisions of whether to record a goodwill impairment in a given year or not are of primary interest. The main findings of this paper are the following. First, it is shown that CEO changes and goodwill impairments are positively and significantly associated, implying that new CEOs use goodwill impairments in their earnings baths. Second, it is shown that ex-CEO’s board service does not affect the positive association between CEO changes and goodwill impairments, despite the incentives for preventing impairment. Third, it is shown that the positive association between CEO changes and goodwill impairments is driven by CEO resignations and not by CEO retirements. Finally, it is shown that goodwill impairments after CEO changes are also larger

Corporate Governance and Management Succession in Family Businesses

Family businesses carry the weight of economic wealth creation in most economies. In the U.S. alone, family businesses account for 80 to 90 percent of the 18-million business enterprises in the United States, and 50 percent of the employment and GNP. In many ways, the family business is synonymous with the entrepreneurial organization as many were started as a means to provide for the financial well being of the founder's family. Founders who went on to build family empires started many of today's large corporations (e.g., Anheuser-Busch, Dupont, and Seagrams). Still, we know relatively little about the issues peculiar to a family business, such as the process and impact of succession planning. Yet, no recurring event in the life of the family firm is more critical to survival than the transfer of power from the incumbent to the successor. Organizations are especially susceptible to loss of vision and purpose during periods of CEO transition, as the leaders who helped shape the vision are replaced by others who may not share the same values and abilities. This study addresses the importance of understanding business succession planning by proposing and empirically verifying a model of succession planning and firm effectiveness in the family business. It links aspects of succession planning and successor preparation to the effectiveness of transition and from performance. The model depicts multiple interactive relationships, with emphasis placed not only on the planning and process-specific but also on successor-specific factors that lead to effectiveness.corporate governance, family businesses, management succession, firm performance, successor characteristics

Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences

Researchers have used various measures as indications of “earnings quality” including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because “quality” is contingent on the decision context. We also point out that the “quality” of earnings is a function of the firm’s fundamental performance. The contribution of a firm’s fundamental performance to its earnings quality is suggested as one area for future work