Earnings management, horizon problem, and advisor posts for retiring CEOs

An advisor post is one of the most important post-retirement careers for a chief executive officer (CEO). Using unique hand-collected data on advisor posts in Japanese listed firms, we examine whether retiring CEOs overstate earnings to acquire an advisor post. Consistent with the horizon problem, we find that earnings overstatement is greater in the year immediately before the CEO's post-retirement career is determined to be an advisor. This relation is also more (less) pronounced for firms with weaker (stronger) internal monitoring. These results suggest that retiring CEOs choose income-increasing accounting to acquire an advisor position, and such opportunistic ac-counting choice is more (less) pronounced in firms with weaker (stronger) internal monitoring.