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[2023년 2차] Old Soldiers Never Die: Life of Former CEOs Named Kaicho

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About a third of Japan’s listed firms have former CEOs sitting on the board of directors. The majority of these former CEOs (called kaicho’s) are not founders; nor do they have meaningful shareholdings. This study documents evidence suggesting that these former CEOs wield influence after their CEO tenure is over. Their presence is associated with less earnings management and less extreme investments (such as under or overinvestment). Their presence is also associated with a lower probability of big bath earnings management by fresh new CEOs. During the Global Financial Crisis, kaicho firms displayed less accounting conservatism and their investments were more within the normal range, compared to non-kaicho firms. Overall, the former CEOs’ presence on boards appears to induce firms to seek “Everything in moderation” in accounting and investment policies, potentially, due to a combination of supervision, moral support and/or responsibility diffusion.

Keywords: Former CEOs, board of directors, earning management, underinvestment, accounting conservatism, corporate governance
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Old Soldiers Never Die Life of Former CEOs Named Kaicho.pdf
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