DO CEO CHARACTERISTICS AND WOMEN ON BOARDS DRIVE EARNINGS MANAGEMENT?

Fivi Anggraini, Riska Gustivani

Abstract


Abstrak – Apakah Karakteristik CEO dan Posisi Pemimpin Wanita Memicu Manajemen Laba?

Tujuan Utama – Penelitian ini menginvestigasi bagaimana karakteristik chief executive officer (CEO) dan pemimpin wanita berdampak pada manajemen laba. 

Metode – Metode regresi data panel digunakan dalam penelitian ini. Sampel penelitian adalah 23 perusahaan sektor industri konsumsi yang terdaftar pada Bursa Efek Indonesia selama 2016-2020.

Temuan Utama – Beberapa proksi karakteristik CEO mampu memicu manajemen laba, yaitu usia, masa jabatan, keanggotaan dewan, kompensasi, dan keahlian. Pada sisi lain proksi pemimpin wanita tidak menimbulkan perilaku tindakan manajemen laba. Hasil ini menunjukkan bahwa CEO dengan keahlian khusus dapat mempengaruhi kinerja perusahaan.

Implikasi Teori dan Kebijakan – Hasil penelitian mendukung teori keagenan. Selain itu, penelitian ini merekomendasikan bahwa karakteristik CEO dan pemimpin wanita dapat memberikan pengetahuan tentang kinerja direktur utama terhadap perilaku manajemen laba.

Kebaruan Penelitian – Penelitian ini mengkonseptualisasikan semua karakteristik CEO dan pemimpin wanita pada perusahaan sektor industri konsumsi. 

 

Abstract - Do CEO Characteristics and Women on Boards Drive Earnings Management?

Main Purpose – This study investigates how the characteristics of chief executive officers (CEOs) and women on board impact earnings management.

Method - The panel data regression method is used in this study. The research sample is 23 companies in the consumer industry sector that are listed on the Indonesia Stock Exchange during 2016-2020.

Main Findings – Several characteristic features of a CEO can trigger earnings management, namely age, tenure, board, compensation, and skills. On the other hand, the proxies for women on board do not lead to earnings management behavior. This study indicates that CEOs with special skills can influence company performance.

Theory and Practical Implications – This study supports the agency theory. In addition, this study recommends that the characteristics of the CEO and women on board can provide knowledge about the performance of the main director on earnings management behavior.

Novelty – This study conceptualizes all the characteristics of CEOs and women on board in industrial consumption sector companies.


Keywords


agency theory; ceo characteristics; earnings management; women on board

Full Text:

PDF

References


Adams, R. B., Haan, J., Terjesen, S., & Ees, H. (2015). Board Diversity: Moving the Field Forward. Corporate Governance: An International Review, 23(2), 77–82. https://doi.org/10.1111/corg.12106

Al-Haddad, L., & Whittington, M. (2019). The Impact of Corporate Governance Mechanisms on Real and Accrual Earnings Management Practices: Evidence from Jordan. Corporate Governance (Bingley), 19(6), 1167-1186. https://doi.org/10.1108/CG-05-2018-0183

Ali, A., & Zhang, W. (2015). CEO Tenure and Earnings Management. Journal of Accounting and Economics, 59(1), 60–79. https://doi.org/10.1016/j.jacceco.2014.11.004

Almuzaiqer, M. A., Fatima, A. H., & Ahmad, M. (2022). Royal Family Members and Corporate Governance Characteristics: The Impact on Earnings Management in UAE. International Journal of Business and Society, 23(2), 689-713. https://doi.org/10.33736/IJBS.4834.2022

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 and Information Management, 25(3), 356-375. https://doi.org/10.1108/IJAIM-10-2016-0099

Ansari, I. F., Goergen, M., & Mira, S. (2021). Earnings Management around Founder CEO Reappointments and Successions in Family Firms. European Financial Management, 27(5), 925-958. https://doi.org/10.1111/eufm.12307

Ataay, A. (2020). CEO Outsiderness and Firm Performance in an Emerging Economy: The Moderating Role of Managerial Discretion. Journal of Management and Organization, 26(5), 798-814. https://doi.org/10.1017/jmo.2018.36

Averett, S. L., Bansak, C., & Smith, J. K. (2021). Behind Every High Earning Man is a Conscientious Woman: The Impact of Spousal Personality on Earnings and Marriage. Journal of Family and Economic Issues, 42(1), 29-46. https://doi.org/10.1007/s10834-020-09692-x

Baatwah, S. R., Salleh, Z., & Ahmad, N. (2015). CEO Characteristics and Audit Report Timeliness: Do CEO Tenure and Financial Expertise Matter? Managerial Auditing Journal, 30(9), 998–1022. https://doi.org/10.1108/MAJ-09-2014-1097

Baker, T. A., Lopez, T. J., Reitenga, A. L., & Ruch, G. (2018). The Influence of CEO and CFO Power on Accruals and Real Earnings Management. Review of Quantitative Finance and Accounting, 52, 325–345. https://doi.org/10.1007/s11156-018-0711-z

Balsam, S., & Kwack, S. Y. (2022). The Impact of Connections between the CEO and Top Executives on Appointment, Turnover, and Firm Value. Journal of Business Finance and Accounting, 49(5-6), 882-933. https://doi.org/10.1111/jbfa.12584

Belot, F., & Serving, S. (2018). Earnings Quality in Private SMEs: Do CEO Demographics Matter? Journal of Small Business Management, 56, 323–344. https://doi.org/10.1111/jsbm.12375

Bilbao-Calabuig, P., Fabra, M. E., & Osadnik, I. (2021). Exploring Processes in Spanish, German and UK Boards: A Measurement Framework of Board Know-How, Board Diversity and Directors’ Interactions Interrelation. Team Performance Management, 27(7/8), 553-570. https://doi.org/10.1108/TPM-03-2021-0020

Bouaziz, D., Salhi, B., & Jarboui, A. (2020). CEO Characteristics and Earnings Management: Emperical Evidence from France. Journal of Financial Reporting and Accounting, 18(1), 77–110. https://doi.org/10.1108/JFRA-01-2019-0008

Call, A. C., Campbell, J. L., Dhaliwal, D. S. & Moon, J. R. J. (2017). Employee Quality and Financial Reporting Outcomes. Journal of Accounting and Economics, 64(1), 123–149. https://doi.org/10.1016/j.jacceco.2017.06.003

Carter, M. E., Lynch, L. J., & Martin, M. A. (2022). Board Committee Overlap and the Use of Earnings in CEO Compensation Contracts. Management Science, 68(8), 6268-6297. https://doi.org/10.1287/mnsc.2021.4187

Cheng, J., Cummins, J.D. & Lin, T. (2021). Earnings Management Surrounding Forced CEO Turnover: Evidence from the U.S. Property-Casualty Insurance Industry. Review of Quantitative Finance and Accounting, 56, 819–847. https://doi.org/10.1007/s11156-020-00910-z

Chua, M., Razak, N. H. A., Nassir, A. M., & Yahya, M. H. (2022). Dynamic Capital Structure in Indonesia: Does the Education and Experience of CEOs Matter? Asia Pacific Management Review, 27(1), 58-68. https://doi.org/10.1016/j.apmrv.2021.05.003

Chyz, J. (2013). Personally, Tax Aggressive Executives, and Corporate Tax Sheltering. Journal of Accounting and Economics, 56(3), 311–328. https://doi.org/10.1016/j.jacceco.2013.09.003

Damak, S. T. (2018). Gender Diverse Board and Earnings Management: Evidence from French Listed Companies. Sustainability Accounting, Management and Policy Journal, 19(3), 289–312. https://doi.org/10.1108/SAMPJ-08-2017-0088

Elsheikh, T., Hashim, H. A., Mohamad, N. R., Almaqtari, F. A., & Ettish, A. A. (2022). CEO Facial Masculinity, Characteristics and Earnings Management. Management and Accounting Review, 21(3), 253-282. https://doi.org/10.24191/MAR.V21i03-11

Fan, Y., Jiang, Y., Zhang, X., & Zhou, Y. (2019). Women on Boards and Bank Earnings Management: From Zero to Hero. Journal of Banking and Finance, 107, 105607. https://doi.org/10.1016/j.jbankfin.2019.105607

Ghaleb, B. A. A., Kamardin, H., & Hashed, A. A. (2022). Investment in Outside Governance Monitoring and Real Earnings Management: Evidence from an Emerging Market. Journal of Accounting in Emerging Economies, 12(1), 52-76. https://doi.org/10.1108/JAEE-08-2020-0203

Ghosh A, W. J., & Wang, J. (2019). Accounting Losses as a Heuristic for Managerial Failure: Evidence from CEO Turnovers. Journal of Financial and Quantitative Analysis, 54(2), 877–906. 877–906. https://doi.org/10.1017/S0022109018000728

Gilliam, T. A. (2021). Detecting Real Activities Manipulation: Beyond Performance Matching. Abacus, 57(4), 619-653. https://doi.org/10.1111/abac.12221

Griffin, P. A., Hong, H. A., Liu, Y., & Ryou, J. W. (2021). The Dark Side of CEO Social Capital: Evidence from Real Earnings Management and Future Operating Performance. Journal of Corporate Finance, 68, 101920. https://doi.org/10.1016/j.jcorpfin.2021.101920

Gull, A. A., Nekhili, M., Nagati, H., & Chtioui, T. (2018). Beyond Gender Diversity: How Specific Attributes of Female Directors Affect Earnings Management. The British Accounting Review, 50(3), 255–274. https://doi.org/10.1016/j.bar.2017.09.001

Guu. J. (2022). Do You at Home as Romans Do? CEO Overseas Experience and Financial Misconduct Risk of Emerging Market Firms. Research in International Business and Finance, 60, 101624. https://doi.org/10.1016/j.ribaf.2022.101624

Hambrick, D. C., & Mason, P. A. (1984). Upper Echelons: The Organization as a Reflection of Its Top Managers. The Academy of Management Review, 9(2), 193-206. https://doi.org/10.2307/258434

Hambrick, D. . (2007). Upper Echelons Theory: An Update. Academy of Management Review, 32, 334–343. https://doi.org/10.5465/AMR.2007.24345254

Harakeh, M., El-Gammal, W., & Matar, G. (2019). Female Directors, Earnings Management, and CEO Incentive Compensation: UK Evidence. Research in International Business and Finance, 50, 153-170. https://doi.org/10.1016/j.ribaf.2019.05.001

Healy, P. (1985). The Effect of Bonus Schemes on Accounting Decisions. Journal of Accounting and Economics, 7(1-3), 85–107. https://doi.org/10.1016/0165-4101(85)90029-1

Hiebl, M. R. (2014). Upper Echelons Theory in Management Accounting and Control Reserch. Journal of Management Control, 24(3), 223–240. https://doi.org/10.1007/s00187-013-0183-1

Hooghiemstra, R., Hermes, N., Oxelheim, L., & Randoy, T. (2019). Strangers on the Board: The Impact of Board Internationalization on Earnings Management of Nordic Firms. International Business Review, 28, 119–134. https://doi.org/10.1016/j.ibusrev.2018.08.007

Jackson, A. B., Li, C., & Morris, R. D. (2020). Earnings Co-Movements and the Informativeness of Earnings. Abacus, 56(3), 295-319. https://doi.org/10.1111/abac.12200

Jarva, H., Kallunki, J., & Livne, G. (2019). Earnings Performance Measures and CEO Turnover: Street versus GAAP Earnings. Journal of Corporate Finance, 56, 249-266. https://doi.org/10.1016/j.jcorpfin.2019.02.005

Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Cost, and Ownership Structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Jiang, F., Zhu, B., & Huang, J. (2013). CEO’s Financial Experience and Earnings Management. Journal of Multinational Financial Management, 23(3), 134–145. https://doi.org/10.1016/j.mulfin.2013.03.005

Jiang, X., Zhu, J., Akbar, A., Hou, Z., & Bao, X. (2022). The Dark Side of Executives' Professional Background: Evidence from Chinese Firm's Stock Price Crash Risk. Managerial and Decision Economics, 43(8), 3771-3784. https://doi.org/10.1002/mde.3627

Karsana, Y. W., Rahmawati, D., & Probohudono, A. N. (2022). Family CEO and Earnings Management in Indonesia: Does Separation of Control Right and Cash Flow Right Moderate the Result? International Journal of Economic Policy in Emerging Economies, 16(1), 84-106. https://doi.org/10.1504/IJEPEE.2021.10038304

Kohlberg, L. (1969). Stage and Sequence: The Cognitive-Developmental Approach to Socialization. In. D. Goslin (Ed.), Handbook of Socialization Theory and Research (pp. 347-480). Rand McNally.

Kontesa, M., Brahmana, R., & Tong, A. H. H. (2021). Narcissistic CEOs and Their Earnings Management. Journal of Management and Governance, 25(1), 223-249. https://doi.org/10.1007/s10997-020-09506-0

Kouaib, A., Bouzouitina, A., & Jarboui, A. (2021). Exploring the Nexus between CEO Psychological Biases, Corporate Social Responsibility and, Corporate Governance: Evidence from the European Real Estate Companies. International Journal of Managerial and Financial Accounting, 13(2), 183-208. https://doi.org/10.1504/IJMFA.2021.117761

Kouaib, A., & Jarboi, A. (2016). Real Earnings Management Innovative Firms: Does CEO Profil Make a Difference? Journal of Behavioral and Experimental Finance, 12, 40–54. https://doi.org/10.1016/j.jbef.2016.09.002

Kuang, Y. F., Liu, X. K., Paruchuri, S., & Qin, B. (2022). CFO Social Ties to Non-CEO Senior Managers and Financial Restatements. Accounting and Business Research, 52(2), 115-149. https://doi.org/10.1080/00014788.2020.1793719

Lestari, Y. A., & Naimah, Z. (2020). Peran Entrenchment Effect dari Konsentrasi Kepemilikan untuk Peningkatan Kualitas Laba. Jurnal Akuntansi Multiparadigma, 11(2), 321-333. https://doi.org/10.21776/ub.jamal.2020.11.2.19

Lafuente, E., & García-Cestona, M. Á. (2021). CEO Turnover in Public and Private Organizations: Analysis of the Relevance of Different Performance Horizons. Journal of Economics, Finance and Administrative Science, 26(2), 333-357. https://doi.org/10.1108/JEFAS-05-2021-0075

Li, L., Holmes, M.J. & Lee, B. (2016). The Asymmetric Relationship between Executive Earnings Management and Compensation: A Panel Threshold Regression Approach. Applied Economics, 48(57), 5525–5545. https://doi.org/10.1080/00036846.2016.1181707

Li, M., & Roberts, H. (2018). CEO Board Membership: Implications for Firm Value. Pacific Accounting Review, 30(3), 352–370. https://doi.org/10.1108/PAR-05-2017-0037

Lin, F., Lin, S., & Fang, W. (2020). How CEO Narcissism Affects Earnings Management Behaviors. North American Journal of Economics and Finance, 51, 101080. https://doi.org/10.1016/j.najef.2019.101080

Lindrianasari, Hartono, J., Supriyadi, & Miharjo, S. (2013). Change of Company ownership, CEO Turnover and the Origin of CEO: Case from Indonesia. Journal for Global Business Advancement, 6(1), 3-12. https://doi.org/10.1504/JGBA.2013.053474

Moumen, N., Othman, H. B., & Hussainey, K. (2016). Board Structure and the Informativeness of Risk Disclosure: Evidence from MENA Emerging Markets. Advances in Accounting, 35, 82-97. https://doi.org/10.1016/j.adiac.2016.09.001

Ngo, A., Guha, S., Pham, C., & Chung, P. (2022). CEO Firm-Related Wealth, Managerial Horizon, and Earnings Management. Journal of Corporate Accounting and Finance, 33(3), 149-162. https://doi.org/10.1002/jcaf.22556

Nguyen, T. T., Duong, C. M., & Narendran, S. (2021). CEO Profile and Earnings Quality. Review of Quantitative Finance and Accounting, 56(3), 987-1025. https://doi.org/10.1007/s11156-020-00916-7

Nielsen, B. B., & Nielsen, S. (2013). Top Management Team Nationality Diversity and Firm Performance: A Multilevel Study. Startegic Management Journal, 34(3), 373–382. https://doi.org/10.1002/smj.2021

Nuanpradit, S. (2019). Real Earnings Management in Thailand: CEO Duality and Serviced Early Years. Asia-Pacific Journal of Business Administration, 11(1), 88-108. https://doi.org/10.1108/APJBA-08-2018-0133

Oware, K. M., & Awunyo-Vitor, D. (2021). CEO Characteristics and Environmental Disclosure of Listed Firms in an Emerging Economy: Does Sustainability Reporting Format Matter? Business Strategy and Development, 4(4), 399-410. https://doi.org/10.1002/bsd2.166

Piekkari, R., Oxelheim, L., & Randoy, T. (2015). The Silent Board: Hou Language Diversity my Infuence the Work Processes Corporate Boards, 23(1). International Review, 25–41. https://doi.org/10.1111/corg.12085

Prasetyo, I., Aliyyah, N., Endarti, E. W., Rusdiyanto, R., & Rahmawati, A. (2022). The Role of Research & Development as Mediating the Effect of Male CEO Masculinity Face on earnings Management: Evidence from Indonesia. Cogent Business and Management, 9(1), 2140491. https://doi.org/10.1080/23311975.2022.2140491

Purba, G. K., & Umboh, V. B. (2021). Earnings Management Practices of Family and Non-Family Entities. Jurnal Akuntansi Multiparadigma, 12(1), 81-94. https://doi.org/10.21776/ub.jamal.2021.12.1.05

Sani, A. A., Abdul Latif, R., & Al-Dhamari, R. A. (2020). CEO Discretion, Political Connection and Real Earnings Management in Nigeria. Management Research Review, 43(8), 909-929. https://doi.org/10.1108/MRR-12-2018-0460

Sarfraz, M., Shah, S. G. M., Ivascu, L., & Qureshi, M. A. A. (2022). Explicating the Impact of Hierarchical CEO Succession on Small-Medium Enterprises' Performance and Cash Holdings. International Journal of Finance and Economics, 27(2), 2600-2614. https://doi.org/10.1002/ijfe.2289

Setiawan, R., & Gestanti, L. (2022). CEO Characteristics, Firm Policy, and Firm Performance. International Journal of Business and Society, 23(1), 371-389. https://doi.org/10.33736/ijbs.4620.2022

Sial, M. S., Vo, X. V., Al-Haddad, L. & Trang, T. N. (2019). Impact of Female Directors on the Board and Foreign Institutional Investors on Earning Manipulation of Chinese Listed Companies. Asia-Pacific Journal of Business Administration, 11(2), 288–300. https://doi.org/10.1108/APJBA-10-2018-0189

Sun, B. (2014). Executive Compensation and Earnings Management under Moral Hazard. Journal of Economic Dynamics and Control, 41, 276–290. https://doi.org/10.1016/j.jedc.2014.02.004

Terjesen, S., Couto, E. B., & Francisco, P. M. (2016). Does the Presence of Independent and Female Directorc Impact Firm Performance? A Muti-Country Study of Board Diversity. Journal of Management & Governance, 20(3), 447–483. https://doi.org./10.1007/s10997-014-9307-8

Usman, M., Nwachukwu, J., & Ezeani, E. (2022). The Impact of Board Characteristics on the Extent of Earnings Management: Conditional Evidence from Quantile Regressions. International Journal of Accounting and Information Management, 30(5), 600-616. https://doi.org/10.1108/IJAIM-05-2022-0112

Wang, G., De-Ghetto, K., Ellen, B. P., & Lamont, B.T. (2019). Board Antecedents of CEO Duality and the Moderating Role of Country Level Managerial Discretion: A Meta Analytic Investigation. Journal of Management Studies, 56(1), 172–202. https://doi.org/10.1111/joms.12408

Yan, B., Aerts, W., & Thewissen, J. (2019). The Informativeness of Impression Management − Financial Analysts and Rhetorical Style of CEO Letters. Pacific Accounting Review, 31(3), 462-496. https://doi.org/10.1108/PAR-09-2017-0063




DOI: http://dx.doi.org/10.21776/ub.jamal.2022.13.3.34

Refbacks

  • There are currently no refbacks.


Copyright (c) 2022 Fivi Anggraini, Riska Gustivani

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.