Do CEO Characteristics affect Financial Reporting Quality? An Empirical Analysis
Keywords:
Upper Echelon theory, CEO characteristics, CEO gender, CEO financial expertise, CEO tenure, Financial reporting qualityAbstract
This research explores the effect of CEO characteristics on financial reporting quality of listed financial firms. This research, with a sample of 15 firms operating in Nigeria's financial institutions from 2008 - 2019, drew insights from the upper echelon theory to investigate the effect of CEO characteristics on the financial reporting quality. CEO characteristics was measured using variables such as CEO gender, CEO financial expertise and CEO tenure. We analysed the data using the panel regression analysis. Empirically, the results showed that there is a positive and insignificant relationship between the CEO gender and financial reporting quality. CEO financial expertise revealed a negative and significant relationship with financial reporting quality. While, CEO tenure revealed a positive and significant relationship with financial reporting quality. The study recommend that internal and external regulatory board should ensure that a maximum CEO tenure is fixed for all listed firms.
References
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Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60-79.
Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60-79.
Alqatamin, R. M., Aribi, Z. A., & Arun, T. (2017). The effect of the CEO’s characteristics on EM: Evidence from Jordan. International Journal of Accounting & Information Management, 25(3), 356-375.
Asegdew, K. (2016). Determinants of financial reporting quality: evidence from large manufacturing share companies of Addis Ababa (Doctoral dissertation, Master Thesis, Department of Accounting and Finance, College of Business and Economics, Addis Ababa University-Addis Ababa, Ethiopia).
Atkinson, S. M., Baird, S. B., & Frye, M. B. (2003). Do female mutual fund managers manage differently?. Journal of Financial Research, 26(1), 1-18.
Axelson, U., & Bond, P. (2009). Investment banking (and other high profile) careers. Working Paper.
Baatwah, S. R., Salleh, Z., & Ahmad, N. (2015). CEO characteristics and audit report timeliness: do CEO tenure and financial expertise matter?. Managerial Auditing Journal.
Bamber, L. S., Jiang, J., & Wang, I. Y. (2010). What’s my style? The influence of top managers on voluntary corporate financial disclosure. The Accounting Review, 85(4), 1131-1162.
Bandyopadhyay, S., Chen, C., Huang, A., & Jha, R. (2010). Accounting conservatism and the temporal trends in current earnings’ ability to predict future cash flows versus future earnings: Evidence on the trade-off between relevance and reliability. Contemporary Accounting Research, 27(2), 413–460.
Bansal, N., & Sharma, A. K. (2016). Audit committee, corporate governance and firm performance: Empirical evidence from India. International Journal of Economics and Finance, 8(3), 103.
Bedard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: Journal of Practice and Theory, 23, 13– 35.
Bernardi, R. A., & Guptill, S. T. (2008). Social desirability response bias, gender, and factors influencing organizational commitment: An international study. Journal of Business Ethics, 81(4), 797-809.
Betz, M., O'Connell, L., & Shepard, J. M. (1989). Gender differences in proclivity for unethical behavior. Journal of Business Ethics, 8(5), 321-324.
Butz, C. E., & Lewis, P. V. (1996). Correlation of gender-related values of independence and relationship and leadership orientation. Journal of Business Ethics, 15(11), 1141-1149.
Collins, D. (2000). The quest to improve the human condition: The first 1 500 articles published in Journal of Business Ethics. Journal of Business ethics, 26(1), 1-73.
Custódio, C., & Metzger, D. (2014). Financial expert CEOs: CEO׳ s work experience and firm׳ s financial policies. Journal of Financial Economics, 114(1), 125-154.
Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review, 77(s-1), 35-59.
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401.
Dibia, N. O., & Onwuchekwa, J. C. (2015). Determinants of environmental disclosures in Nigeria: A case study of oil and gas companies. International Journal of Finance and Accounting, 4(3), 145-152.
Duc, V. H., & Thuy, P. B. G. (2013). Corporate governance and firm’s performance: empirical evidence from Vietnam. Journal of Economic Development, (JED, No. 218), 62-77.
Faccio, M., Marchica, M. T., & Mura, R. (2015). CEO gender. Corporate risk-taking, and the efficiency of capital allocation.
Fathi, J. (2013). Corporate governance and the level of financial disclosure by Tunisian firm. Journal of Business Studies Quarterly, 4(3), 95-111.
Feng, M., Ge, W., Luo, S., & Shevlin, T. (2011). Why do CFOs become involved in material accounting manipulations?. Journal of Accounting and Economics, 51(1-2), 21-36.
Ford, R. C., & Richardson, W. D. (1994). Ethical decision making: A review of the empirical literature. Journal of Business Ethics, 13(3), 205-221.
Fung, B. (2014). The demand and need for transparency and disclosure in corporate governance. Universal Journal of Management, 2(2), 72-80.
Fung, B. (2014). The demand and need for transparency and disclosure in corporate governance. Universal Journal of Management, 2(2), 72-80.
Gibbons, R., & Murphy, K. J. (1992). Does executive compensation affect investment?. NBER Working Paper, (w4135).
Gilligan, C. (1982). The contribution of women's thought to developmental theory: The elimination of sex bias in moral development research and education.
Gounopoulos, D., & Pham, H. (2018). Financial expert CEOs and earnings management around initial public offerings. The International Journal of Accounting, 53(2), 102-117.
Hambrick, D. C. (2007). Upper echelons theory: An update.
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206.
Hazarika, S., Karpoff, J. M., & Nahata, R. (2012). Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics, 104(1), 44-69.
Hermalin, B. E., & Weisbach, M. S. (2012). Information disclosure and corporate governance. The Journal of Finance, 67(1), 195-233.
Hong, D., & Xiao, C. (2007). Sociological analysis on gender difference of environmental concern. Sociological Studies, 2, 1-19.
Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives?. Journal of financial Economics, 108(3), 822-839.
Ivanova, I. A., & Bikeeva, M. V. (2016). Corporate social responsibility: specificity, formation mechanism, estimation of management efficiency. European Research Studies, 19, 167.
Jeanjean, T., & Stolowy, H. (2009). Determinants of board members' financial expertise—Empirical evidence from France. The International Journal of Accounting, 44(4), 378-402.
Jiang, F., Zhu, B., & Huang, J. (2013). CEO's financial experience and earnings management. Journal of Multinational Financial Management, 23(3), 134-145.
Johnson, J. E., & Powell, P. L. (1994). Decision making, risk and gender: Are managers different?. British Journal of Management, 5(2), 123-138.
Kalyta, P. (2009). Accounting discretion, horizon problem, and CEO retirement benefits. The Accounting Review, 84(5), 1553-1573.
Khan, W. A., & Vieito, J. P. (2013). CEO gender and firm performance. Journal of Economics and Business, 67, 55-66.
Kim, K., & Yang, J. S. (2014). Director Tenure and Financial Reporting Quality: Evidence from Korea. Review of Integrative Business and Economics Research, 3(1), 237.
Kim, M., & Kross, W. (2005). The ability of earnings to predict future operating cash flows has been increasing—not decreasing. Journal of Accounting Research, 43(5), 753-780.
Kirschenheiter, M. 1997. Information Quality and Correlated Signals. Journal of Accounting Research 35(1), 43–59.
Klai, N., &Omri, A. (2011). Corporate governance and financial reporting quality: The case of Tunisian firms. International Business Research, 4(1), 158-166.
Krishnan, G. V., & Parsons, L. M. (2008). Getting to the bottom line: An exploration of gender and earnings quality. Journal of Business Ethics, 78(1-2), 65-76.
Kythreotis, A. (2014). Measurement of financial reporting quality based on IFRS conceptual framework’s fundamental qualitative characteristics. European Journal of Accounting, Finance & Business, 2(3), 4-29.
Liu, G., & Sun, J. (2010). Director tenure and independent audit committee effectiveness. International Research Journal of Finance and Economics, 51.
Mahboub, R. (2017). Main determinants of financial reporting quality in the Lebanese banking sector. European Research Studies, 20(4B), 706-726.
Markham, J. W. (2015). A financial history of the United States: From Enron-era scandals to the subprime crisis (2004-2006); from the subprime crisis to the Great Recession (2006-2009). Routledge.
Martin, A. D., Nishikawa, T., & Williams, M. A. (2009). CEO gender: Effects on valuation and risk. Quarterly Journal of Finance and Accounting, 23-40.
Mason, E. S., & Mudrack, P. E. (1996). Gender and ethical orientation: A test of gender and occupational socialization theories. Journal of Business Ethics, 15(6), 599-604.
McNichols, M. F. (2002). Discussion of the quality of accruals and earnings: multiples. Journal of Accounting Research, 40(1), 135-72.
Nyor, T. (2013). Financial reporting quality of Nigerian firms: Users’ perception. International Journal of Business and Social Science, 4(13), 273-79.
Olowokure, O. A., Tanko, M., & Nyor, T. (2015). Firm structural characteristics and financial reporting quality of listed deposit money banks in Nigeria. International Business Research, 9(1), 106.
Peni, E., & Vähämaa, S. (2010). Female executives and earnings management. Managerial Finance, 36(7), 629-645.
Pourciau, S. (1993). Earnings management and nonroutine executive changes. Journal of Accounting and Economics, 16(1-3), 317-336.
Rasha, B. (2017). Main Determinants of Financial Reporting Quality in the Lebanese Banking Sector. European Research Studies Journal , 20 (4b), 706-726.
Richardson, S., R. Sloan, M. Soliman, and I. Tuna. 2005. Accrual reliability, earnings persistence, and stock prices. Journal of Accounting and Economics 39, 437-485.
Roxas, M. L., & Stoneback, J. Y. (2004). The importance of gender across cultures in ethical decision-making. Journal of Business Ethics, 50(2), 149-165.
Santoso, R. D., & Fuâ, M. (2014). CEO characteristics and earnings management (Doctoral dissertation, [Yogyakarta]: Universitas Gadjah Mada).
Soheilyfar, F., Tamimi, M., Ahmadi, M.R., & Takhtaei, N. (2014). Disclosure quality and corporate governance: Evidence from Iran. Asian Journal and Finance and Accounting, 6(2), 75-86.
Thiruvadi, S., & Huang, H. W. (2011). Audit committee gender differences and earnings management. Gender in Management: An International Journal.
Uwuigbe, O. R. (2011). Corporate governance and financial performance of banks: a study of listed banks in Nigeria (Doctoral dissertation, Covenant University).
Vafeas, N. (2003). Length of board tenure and outside director independence. Journal of Business Finance & Accounting, 30(7‐8), 1043-1064.
White, H. 2007. Assessing accrual reliability in periods of suspected opportunism. Working paper
Zhang, Y., & Wiersema, M. F. (2009). Stock market reaction to CEO certification: The signaling role of CEO background. Strategic Management Journal, 30(7), 693-710.
Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60-79.
Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60-79.
Alqatamin, R. M., Aribi, Z. A., & Arun, T. (2017). The effect of the CEO’s characteristics on EM: Evidence from Jordan. International Journal of Accounting & Information Management, 25(3), 356-375.
Asegdew, K. (2016). Determinants of financial reporting quality: evidence from large manufacturing share companies of Addis Ababa (Doctoral dissertation, Master Thesis, Department of Accounting and Finance, College of Business and Economics, Addis Ababa University-Addis Ababa, Ethiopia).
Atkinson, S. M., Baird, S. B., & Frye, M. B. (2003). Do female mutual fund managers manage differently?. Journal of Financial Research, 26(1), 1-18.
Axelson, U., & Bond, P. (2009). Investment banking (and other high profile) careers. Working Paper.
Baatwah, S. R., Salleh, Z., & Ahmad, N. (2015). CEO characteristics and audit report timeliness: do CEO tenure and financial expertise matter?. Managerial Auditing Journal.
Bamber, L. S., Jiang, J., & Wang, I. Y. (2010). What’s my style? The influence of top managers on voluntary corporate financial disclosure. The Accounting Review, 85(4), 1131-1162.
Bandyopadhyay, S., Chen, C., Huang, A., & Jha, R. (2010). Accounting conservatism and the temporal trends in current earnings’ ability to predict future cash flows versus future earnings: Evidence on the trade-off between relevance and reliability. Contemporary Accounting Research, 27(2), 413–460.
Bansal, N., & Sharma, A. K. (2016). Audit committee, corporate governance and firm performance: Empirical evidence from India. International Journal of Economics and Finance, 8(3), 103.
Bedard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: Journal of Practice and Theory, 23, 13– 35.
Bernardi, R. A., & Guptill, S. T. (2008). Social desirability response bias, gender, and factors influencing organizational commitment: An international study. Journal of Business Ethics, 81(4), 797-809.
Betz, M., O'Connell, L., & Shepard, J. M. (1989). Gender differences in proclivity for unethical behavior. Journal of Business Ethics, 8(5), 321-324.
Butz, C. E., & Lewis, P. V. (1996). Correlation of gender-related values of independence and relationship and leadership orientation. Journal of Business Ethics, 15(11), 1141-1149.
Collins, D. (2000). The quest to improve the human condition: The first 1 500 articles published in Journal of Business Ethics. Journal of Business ethics, 26(1), 1-73.
Custódio, C., & Metzger, D. (2014). Financial expert CEOs: CEO׳ s work experience and firm׳ s financial policies. Journal of Financial Economics, 114(1), 125-154.
Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review, 77(s-1), 35-59.
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401.
Dibia, N. O., & Onwuchekwa, J. C. (2015). Determinants of environmental disclosures in Nigeria: A case study of oil and gas companies. International Journal of Finance and Accounting, 4(3), 145-152.
Duc, V. H., & Thuy, P. B. G. (2013). Corporate governance and firm’s performance: empirical evidence from Vietnam. Journal of Economic Development, (JED, No. 218), 62-77.
Faccio, M., Marchica, M. T., & Mura, R. (2015). CEO gender. Corporate risk-taking, and the efficiency of capital allocation.
Fathi, J. (2013). Corporate governance and the level of financial disclosure by Tunisian firm. Journal of Business Studies Quarterly, 4(3), 95-111.
Feng, M., Ge, W., Luo, S., & Shevlin, T. (2011). Why do CFOs become involved in material accounting manipulations?. Journal of Accounting and Economics, 51(1-2), 21-36.
Ford, R. C., & Richardson, W. D. (1994). Ethical decision making: A review of the empirical literature. Journal of Business Ethics, 13(3), 205-221.
Fung, B. (2014). The demand and need for transparency and disclosure in corporate governance. Universal Journal of Management, 2(2), 72-80.
Fung, B. (2014). The demand and need for transparency and disclosure in corporate governance. Universal Journal of Management, 2(2), 72-80.
Gibbons, R., & Murphy, K. J. (1992). Does executive compensation affect investment?. NBER Working Paper, (w4135).
Gilligan, C. (1982). The contribution of women's thought to developmental theory: The elimination of sex bias in moral development research and education.
Gounopoulos, D., & Pham, H. (2018). Financial expert CEOs and earnings management around initial public offerings. The International Journal of Accounting, 53(2), 102-117.
Hambrick, D. C. (2007). Upper echelons theory: An update.
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206.
Hazarika, S., Karpoff, J. M., & Nahata, R. (2012). Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics, 104(1), 44-69.
Hermalin, B. E., & Weisbach, M. S. (2012). Information disclosure and corporate governance. The Journal of Finance, 67(1), 195-233.
Hong, D., & Xiao, C. (2007). Sociological analysis on gender difference of environmental concern. Sociological Studies, 2, 1-19.
Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives?. Journal of financial Economics, 108(3), 822-839.
Ivanova, I. A., & Bikeeva, M. V. (2016). Corporate social responsibility: specificity, formation mechanism, estimation of management efficiency. European Research Studies, 19, 167.
Jeanjean, T., & Stolowy, H. (2009). Determinants of board members' financial expertise—Empirical evidence from France. The International Journal of Accounting, 44(4), 378-402.
Jiang, F., Zhu, B., & Huang, J. (2013). CEO's financial experience and earnings management. Journal of Multinational Financial Management, 23(3), 134-145.
Johnson, J. E., & Powell, P. L. (1994). Decision making, risk and gender: Are managers different?. British Journal of Management, 5(2), 123-138.
Kalyta, P. (2009). Accounting discretion, horizon problem, and CEO retirement benefits. The Accounting Review, 84(5), 1553-1573.
Khan, W. A., & Vieito, J. P. (2013). CEO gender and firm performance. Journal of Economics and Business, 67, 55-66.
Kim, K., & Yang, J. S. (2014). Director Tenure and Financial Reporting Quality: Evidence from Korea. Review of Integrative Business and Economics Research, 3(1), 237.
Kim, M., & Kross, W. (2005). The ability of earnings to predict future operating cash flows has been increasing—not decreasing. Journal of Accounting Research, 43(5), 753-780.
Kirschenheiter, M. 1997. Information Quality and Correlated Signals. Journal of Accounting Research 35(1), 43–59.
Klai, N., &Omri, A. (2011). Corporate governance and financial reporting quality: The case of Tunisian firms. International Business Research, 4(1), 158-166.
Krishnan, G. V., & Parsons, L. M. (2008). Getting to the bottom line: An exploration of gender and earnings quality. Journal of Business Ethics, 78(1-2), 65-76.
Kythreotis, A. (2014). Measurement of financial reporting quality based on IFRS conceptual framework’s fundamental qualitative characteristics. European Journal of Accounting, Finance & Business, 2(3), 4-29.
Liu, G., & Sun, J. (2010). Director tenure and independent audit committee effectiveness. International Research Journal of Finance and Economics, 51.
Mahboub, R. (2017). Main determinants of financial reporting quality in the Lebanese banking sector. European Research Studies, 20(4B), 706-726.
Markham, J. W. (2015). A financial history of the United States: From Enron-era scandals to the subprime crisis (2004-2006); from the subprime crisis to the Great Recession (2006-2009). Routledge.
Martin, A. D., Nishikawa, T., & Williams, M. A. (2009). CEO gender: Effects on valuation and risk. Quarterly Journal of Finance and Accounting, 23-40.
Mason, E. S., & Mudrack, P. E. (1996). Gender and ethical orientation: A test of gender and occupational socialization theories. Journal of Business Ethics, 15(6), 599-604.
McNichols, M. F. (2002). Discussion of the quality of accruals and earnings: multiples. Journal of Accounting Research, 40(1), 135-72.
Nyor, T. (2013). Financial reporting quality of Nigerian firms: Users’ perception. International Journal of Business and Social Science, 4(13), 273-79.
Olowokure, O. A., Tanko, M., & Nyor, T. (2015). Firm structural characteristics and financial reporting quality of listed deposit money banks in Nigeria. International Business Research, 9(1), 106.
Peni, E., & Vähämaa, S. (2010). Female executives and earnings management. Managerial Finance, 36(7), 629-645.
Pourciau, S. (1993). Earnings management and nonroutine executive changes. Journal of Accounting and Economics, 16(1-3), 317-336.
Rasha, B. (2017). Main Determinants of Financial Reporting Quality in the Lebanese Banking Sector. European Research Studies Journal , 20 (4b), 706-726.
Richardson, S., R. Sloan, M. Soliman, and I. Tuna. 2005. Accrual reliability, earnings persistence, and stock prices. Journal of Accounting and Economics 39, 437-485.
Roxas, M. L., & Stoneback, J. Y. (2004). The importance of gender across cultures in ethical decision-making. Journal of Business Ethics, 50(2), 149-165.
Santoso, R. D., & Fuâ, M. (2014). CEO characteristics and earnings management (Doctoral dissertation, [Yogyakarta]: Universitas Gadjah Mada).
Soheilyfar, F., Tamimi, M., Ahmadi, M.R., & Takhtaei, N. (2014). Disclosure quality and corporate governance: Evidence from Iran. Asian Journal and Finance and Accounting, 6(2), 75-86.
Thiruvadi, S., & Huang, H. W. (2011). Audit committee gender differences and earnings management. Gender in Management: An International Journal.
Uwuigbe, O. R. (2011). Corporate governance and financial performance of banks: a study of listed banks in Nigeria (Doctoral dissertation, Covenant University).
Vafeas, N. (2003). Length of board tenure and outside director independence. Journal of Business Finance & Accounting, 30(7‐8), 1043-1064.
White, H. 2007. Assessing accrual reliability in periods of suspected opportunism. Working paper
Zhang, Y., & Wiersema, M. F. (2009). Stock market reaction to CEO certification: The signaling role of CEO background. Strategic Management Journal, 30(7), 693-710.
Published
2021-01-19
How to Cite
Ashafoke, T., Dabor, E., & Ilaboya, J. (2021). Do CEO Characteristics affect Financial Reporting Quality? An Empirical Analysis: Array. Acta Universitatis Danubius. Œconomica, 17(1). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/774
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Financial Economics
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