Date of this Version
Wilson, N,. 2023. Do CEO Gratification Preferences Influence Discretionary Accounting Choices Near Retirement?
CEOs near retirement are less motivated to act in shareholders' best interests than those planning to remain indefinitely; this is the horizon problem. Financial reporting that personifies the horizon problem includes an abrupt reduction in discretionary spending and an increase in current accounting earnings; this abrupt change in reporting is potentially detrimental to long-term gains. Gratification preference, defined by observable tendencies, is a personal characteristic reflecting one's prior life experiences and environments. This study offers an archival measure of these gratification preferences and examines whether these preferences mitigate or exacerbate the CEO horizon problem. The results suggest that discretionary accounting choices close to CEO retirement are a function of the proposed measure of CEO gratification preferences.
Advisor: Thomas Omer