Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
Document Type
Article
Publication Date
1-1-2023
Abstract
This study investigates the effects of powerful Chief Executive Officers (CEOs) on earnings quality in a setting where CEOs have strong dominance over other top executives and occasionally attempt to exert their influence over corporate regulatory bodies. Using 10-year longitudinal data for the period from 2010 to 2019 and 1,395 firm-year observations from listed non-financial firms in Bangladesh, we found that CEOs' political power and CEOs with high structural and expert power have a significant detrimental effect on earnings quality. Ownership and prestige power have an insignificant impact on earnings quality. These powerful CEOs use accrual and real activity manipulation techniques together to manage the earnings. This study uses the system-generalized method of moment estimates for estimation purposes, and the results remain robust when alternative earnings quality proxies are used. Taken together, our results suggest that CEOs' political duality (i.e., serving simultaneously as a member of parliament and a CEO) should be restricted and that a CEO's tenure should be limited to a reasonable period. This research adds to the existing body of knowledge by offering empirical support for CEO power dynamics on earnings quality, specifically political and prestige power.
Keywords
Agency Cost Evidence, Political Connections, Family Firms, Auditor Choice, Top Management, Corporate Governance, Managerial Ability, Board Composition, Sarbanes-Oxley, Panel-Data
Divisions
accounting
Funders
Special Publication Fund of the Faculty of Business and Economics, Universiti Malaya
Publication Title
PLoS ONE
Volume
18
Issue
1
Publisher
Public Library of Science
Publisher Location
1160 BATTERY STREET, STE 100, SAN FRANCISCO, CA 94111 USA