Earnings performance measures and CEO turnover: Street versus GAAP earnings

Prior research reports that analysts focus on street earnings, which are measures that typically exceed GAAP earnings. Using a sample of CEO turnovers from 1993 to 2016 we show that the likelihood and speed of forced CEO turnover - but not voluntary turnover - are higher when analysts exclude income-decreasing items. The association between exclusions and forced turnovers is particularly pronounced for high magnitude exclusions. We also show that greater street exclusion of income-decreasing items, the lower CEO bonus payouts. We find that boards use audited and more conservative GAAP earnings in evaluating and dismissing CEOs, except in the recent period of 2010–2016.