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Real earnings management in innovative firms: Does CEO profile make a difference?

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  • Kouaib, Amel
  • Jarboui, Anis

Abstract

The purpose of this paper is to determine and test the effect of CEO profile including behavioral biases and demographic traits on the level of real-based earnings management (REM) in European innovative firms. Drawing on the literature on behavioral theories of leadership, neoclassical agency theory, prospect theory and signal theory, literature is developed, and hypotheses are generated, regarding CEOs attitudes toward manipulations and innovations. Data from a sample of 190 European firms and 460 CEOs spanning the years 2000–2014 are used to test the model using panel data and multiple regression. We split the total sample in two sub-samples according to the R&D intensity. Firms with high R&D intensity are considered more innovative. Not surprisingly, we find that managerial psychological and demographical traits are positively and strongly associated with REM in more innovative firms.

Suggested Citation

  • Kouaib, Amel & Jarboui, Anis, 2016. "Real earnings management in innovative firms: Does CEO profile make a difference?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 12(C), pages 40-54.
    • Handle: RePEc:eee:beexfi:v:12:y:2016:i:c:p:40-54
    DOI: 10.1016/j.jbef.2016.09.002
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    Citations

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    Cited by:

    1. Sawssen Khlifi & Ghazi Zouari, 2021. "The Impact of CEO Overconfidence on Real Earnings Management: Evidence from M&A Transactions," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 20(3), pages 402-424, September.
    2. Kouaib, Amel & Jarboui, Anis, 2017. "The mediating effect of REM on the relationship between CEO overconfidence and subsequent firm performance moderated by IFRS adoption: A moderated-mediation analysis," Research in International Business and Finance, Elsevier, vol. 42(C), pages 338-352.
    3. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    4. Paula Villalba‐Ríos & Carmen Barroso‐Castro & Julio Darío Vecino‐Gravel, 2022. "The influence of CEO profile on corporate social responsibility companies. A qualitative comparative analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(2), pages 356-366, March.
    5. Mohammad Abedalrahman Alhmood & Hasnah Shaari & Redhwan Al-dhamari, 2020. "CEO Characteristics and Real Earnings Management in Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 255-266, July.
    6. He, Liyu & He, Rong & Evans, Elaine, 2020. "Board influence on a firm’s long-term success: Australian evidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    7. Yu Chen & Xiaoyan Chu & Jung Chul Park & Jared S. Soileau, 2022. "CEO religious university affiliation and financial reporting quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 417-468, March.
    8. Ya-Fang Wang & Yen-Fang Kuo, 2020. "Exploring the Family Effect on Innovative Capacity and Earnings Management," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 13(2), pages 39-61, September.
    9. Mike Eom & Mookwon Jung & Jung Chul Park, 2023. "Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States," International Finance, Wiley Blackwell, vol. 26(2), pages 241-258, August.

    More about this item

    Keywords

    CEO profile; Real earnings management; Innovative firms; Stoxx Europe 600 index;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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