Article2017

The Impact of CEO Narcissism on Earnings Management

Francesco Capalbo · Alex Frino · Ming Ying Lim · Vito Mollica · Riccardo Palumbo

169 citations0/0 files storedAbacus

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Auditing, Earnings Management, Governance Accounting and Organizational Management Corporate Governance and Financial Management

Abstract

We provide the first empirical test of the relation between CEO narcissism and earnings manipulation. We test the hypothesis that narcissistic leaders over‐identify themselves with the organizations they lead and expend considerable effort to achieve their goals, including by engaging in unethical behaviour. Earnings announcements are highly anticipated information releases by organizations. They are a key performance indicator used to evaluate the performance of CEOs. This study examines the use of first person singular pronouns by CEOs in response to questions at analyst conferences to measure narcissism. We provide evidence that firms with narcissistic CEOs engage in accruals management to manage earnings positively, highlighting the important effect of CEO personality on accounting choices.

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References

2013Diagnostic and Statistical Manual of Mental Disorders 1991Earnings Management During Import Relief Investigations 1995Detecting Earnings Management.2002The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors 1999A Review of the Earnings Management Literature and Its Implications for Standard Setting 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 2003Managing with Style: The Effect of Managers on Firm Policies 1988A principal-components analysis of the Narcissistic Personality Inventory and further evidence of its construct validity.

Cited by

2019Making CEO Narcissism Research Great: A Review and Meta-Analysis of CEO Narcissism 2019The Deliberate Engagement of Narcissistic CEOs in Earnings Management 2019Annual report readability and stock liquidity 2021Are narcissistic CEOs more tax aggressive? The moderating role of internal audit committees 2020Founder-Controlled Family Firms, Overconfidence, and Corporate Social Responsibility Engagement: Evidence From Survey Data

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