Publication Type
Journal Article
Version
acceptedVersion
Publication Date
10-2024
Abstract
Despite efforts to mitigate aggressive financial reporting, earnings management remains challenging to parties interested in inhibiting its dysfunctional effects. Using linguistic algorithms to assess CEO agreeableness personality from their unscripted texts in conference calls, we find that it is a determinant that mitigates a firm's real earnings management. Furthermore, such an effect is more pronounced when firms confront intensive market competition and financial distress and have weaker managerial entrenchment or when CEOs face stronger internal governance. Our findings persist even after we utilize several alternative real earnings management metrics and control other confounding personalities in prior earnings management studies. The subsample analysis and a two-step endogeneity controlling analysis further support that our results are not driven by the endogeneity in CEO selection process. Our study enriches the upper echelons theory, especially in the personality-situation interaction perspective, and provides insights for firms to incorporate managers' ethical-oriented personality into the mechanisms of curbing real earnings management.
Keywords
Agreeableness, Business ethics, CEO personality, Real earnings management
Discipline
Business Law, Public Responsibility, and Ethics | Databases and Information Systems | Leadership Studies | Numerical Analysis and Scientific Computing
Research Areas
Data Science and Engineering
Areas of Excellence
Digital transformation
Publication
International Review of Financial Analysis
Volume
95
First Page
1
Last Page
22
ISSN
1057-5219
Identifier
10.1016/j.irfa.2024.103458
Publisher
Elsevier
Citation
LIU, Shan; WU, Xingying; and HU, Nan.
Does CEO agreeableness personality mitigate real earnings management?. (2024). International Review of Financial Analysis. 95, 1-22.
Available at: https://ink.library.smu.edu.sg/sis_research/9156
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.irfa.2024.103458
Included in
Business Law, Public Responsibility, and Ethics Commons, Databases and Information Systems Commons, Leadership Studies Commons, Numerical Analysis and Scientific Computing Commons
