A Study on the Relation between CEO’s Tenure and Value Relevance

[Purpose] We test the relationship between the CEO’s tenure and the value relevance of accounting information. Based on the conflicting results from prior studies regarding the CEO’s tenure, we empirically test the hypothesis that the CEO’s tenure is not related to the value relevance of accounting information. [Methodology] We use a research model that extends the Ohlson (1995) model. The CEO’s tenure is measured by using data disclosed in business reports. [Findings] In the case of the CEO’s tenure, we find a positive (＋) relationship with the value relevance of earnings and a negative (－) relationship with the value relevance of equity. This result remains consistent even after conducting various additional tests. The findings suggest that CEO tenure has a positive (negative) incremental value for EPS (BPS). [Implications] We expect this study to provide insights into how the value assigned to accounting information by investors may systematically differ depending on the CEO’s tenure. In this regard, we contribute by testing how investors incorporate the CEO’s tenure into their investment decision－making process.