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Financial reporting consequences of CEOs' early-life exposure to disasters and violent crime

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  • Golden, Joanna
  • Kohlbeck, Mark

Abstract

Understanding the behavior of chief executive officers (CEOs) enables investors, regulators, and others to better appreciate CEOs' corporate decisions. Among the many aspects that determine CEO behavior are early-life experiences, we examine whether a CEO's exposure to two important events—fatal natural disasters and violent crime—during the individual's formative years is associated with the firm's financial reporting outcomes. We argue that a CEO with early life exposure to fatal natural disasters and violent crime may be over-confident when dealing with risk and is more likely to make riskier decisions. However, this relationship becomes negative when the exposure reaches a certain level, consistent with the CEO becoming risk-averse when making business decisions (Bernile, Bhagwat, & Rau, 2017). Consistently, we report evidence of a U-shaped association between financial reporting quality and both types of early-life exposures. In addition, we find that the link between a CEO's early-life exposures and financial reporting quality is more pronounced in firms with greater incentives to manage earnings.

Suggested Citation

  • Golden, Joanna & Kohlbeck, Mark, 2024. "Financial reporting consequences of CEOs' early-life exposure to disasters and violent crime," Advances in accounting, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:advacc:v:66:y:2024:i:c:s0882611023000573
    DOI: 10.1016/j.adiac.2023.100698
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    References listed on IDEAS

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    More about this item

    Keywords

    CEO early-life exposure; Fatal natural disasters; Violent crime; Financial reporting quality;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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