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The influence of CEO and CFO power on accruals and real earnings management

Review of quantitative finance and accounting, 2019-01, Vol.52 (1), p.325-345 [Peer Reviewed Journal]

Springer Science+Business Media, LLC, part of Springer Nature 2018 ;Review of Quantitative Finance and Accounting is a copyright of Springer, (2018). All Rights Reserved. ;ISSN: 0924-865X ;EISSN: 1573-7179 ;DOI: 10.1007/s11156-018-0711-z

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Title:
The influence of CEO and CFO power on accruals and real earnings management
Author: Baker, Terry A. ; Lopez, Thomas J. ; Reitenga, Austin L. ; Ruch, George W.
Subjects: Accounting/Auditing ; Accruals ; Chief executive officers ; Chief executives ; Chief financial officers ; Corporate Finance ; Earnings ; Earnings management ; Econometrics ; Economics and Finance ; Finance ; Financial reporting ; Operations Research/Decision Theory ; Original Research ; Power ; Public Company Accounting Reform & Investor Protection Act 2002-US
Is Part Of: Review of quantitative finance and accounting, 2019-01, Vol.52 (1), p.325-345
Description: In this study, we examine the effect of CEO and CFO power on both accruals and real earnings management (AEM and REM, respectively), and the extent to which CEO and CFO power mitigate the effect of one another on AEM and REM. We further examine whether the passage of the Sarbanes-Oxley Act (SOX) altered these effects. In the pre-SOX period, we find that AEM (REM) is greater when the CEO (CFO) is powerful relative to the CFO (CEO). In the post-SOX period, however, we find that the effect of relative CEO power on AEM subsides, whereas the effect of relative CFO power on REM persists. Additionally, we find evidence to suggest that powerful CFOs inhibit the AEM preferences of powerful CEOs in both the pre- and post-SOX periods. Finally, we find evidence to suggest that powerful CEOs inhibit the REM preferences of powerful CEOs in the pre-SOX period, but not in the post-SOX period. Collectively, our results suggest that the power of the CEO relative to the CFO is an important factor in the both the type and magnitude of earnings management.
Publisher: New York: Springer US
Language: English
Identifier: ISSN: 0924-865X
EISSN: 1573-7179
DOI: 10.1007/s11156-018-0711-z
Source: ProQuest Central

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The influence of CEO and CFO power on accruals and real earnings management

Springer Science+Business Media, LLC, part of Springer Nature 2018 ;Review of Quantitative Finance and Accounting is a copyright of Springer, (2018). All Rights Reserved. ;ISSN: 0924-865X ;EISSN: 1573-7179 ;DOI: 10.1007/s11156-018-0711-z

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