CEO Reputation and Earnings Quality

Francis, Jennifer; Huang, Allen; Rajgopal, Shivaram; Zang, Amy Y.

doi:10.2139/ssrn.609401

Cited by 141 publications

(191 citation statements)

References 47 publications

Supporting

Mentioning

165

Contrasting

Unclassified

Order By: Relevance

“…This is supported by the findings from prior studies, i.e., managers issue voluntary earnings forecasts to signal their ability [15] and managers with higher ability release more voluntary disclosures [16]. On the other hand, CEOs with high ability may be reluctant to disclose management earnings forecasts due to opportunistic reasons [17,18]. In this case, managerial ability and future stock price crash risk would be positively related.…”

Section: Introductionsupporting

confidence: 68%

“…In contrast, a number of previous studies suggested that voluntary disclosure is associated with opportunistic incentives of managers [17,18] and managers would not disclose information properly due to their own interests. Upon announcement of bad news, managers could suffer a loss of compensation, bonuses, stock options, promotion opportunities or even their jobs, hence there are incentives to delay bad news disclosure to relieve career concerns [11,44].…”

Section: Hypotheses Developmentmentioning

confidence: 83%

“…Reference [2] used managerial replacement samples to separate managerial effects from firm characteristics, and showed that managerial style affects research and development, investment and financial decision-making and is also related to firm performance and compensation. Reference [17] examined more directly the impact of manager's reputation, measured by their exposure to the media, on accounting information. They showed a negative relationship between manager's reputation and discretionary accruals.…”

Section: Managerial Abilitymentioning

confidence: 99%

See 2 more Smart Citations

The Effect of Managerial Ability on Future Stock Price Crash Risk: Evidence from Korea

Park

Jung

2017

Sustainability

View full text Add to dashboard Cite

This study examines the effect of managerial ability on subsequent stock price crash risk using listed firm data in Korea. Compared to some financially advanced countries, the influence of managers is particularly more powerful in Korea, as ownership and management are not effectively separate in most Korean firms. In addition, we considered the effect of large business groups called Chaebol, which is family-run conglomerates with unique corporate governance system that hugely affect the Korean economy. It is important to recognize determinants of the stock price crash risk which would result in doubt on going concern to enhance the company's sustainable management. Hence, this study focuses on the managerial ability as one of the main factors of the stock price crash risk. We use the measures of firm-specific stock price crash risk based on Hutton et al. (2009). Managerial ability is estimated through a Data Envelopment Analysis (DEA) and tobit regressions following Demerjian et al. (2012). From the empirical tests, there is a negative association between managerial ability and stock price crash risk. This suggests that managers with a higher ability release more voluntary disclosure to signal their ability, ultimately lowering the subsequent stock price crash risk. We also find that firms in large business groups, Chaebol, weaken the negative association between managerial ability and subsequent stock price crash risk.

show abstract

Section: Introductionsupporting

confidence: 68%

Section: Hypotheses Developmentmentioning

confidence: 83%

Section: Managerial Abilitymentioning

confidence: 99%

See 1 more Smart Citation

The Effect of Managerial Ability on Future Stock Price Crash Risk: Evidence from Korea

Park

Jung

2017

Sustainability

View full text Add to dashboard Cite

show abstract

“…They find that more reputed CEOs are associated with poorer earnings quality relative to less reputed CEOs. Francis et al (2008) interpret their findings as evidence primarily for a matching explanation;…”

Section: Retailmentioning

confidence: 96%

“…Using observable managerial characteristics, Bertrand and Schoar (2003) also conclude that executives from earlier birth cohorts appear to be more conservative while executives who hold a MBA degree appear to follow more aggressive strategies. Francis et al (2008) examine the association between CEO reputation and earnings quality. They find that more reputed CEOs are associated with poorer earnings quality relative to less reputed CEOs.…”

Section: Retailmentioning

confidence: 99%

The Spread of Aggressive Corporate Tax Reporting: A Detailed Examination of the Corporate-Owned Life Insurance Shelter

Brown

2011

The Accounting Review

194

View full text Add to dashboard Cite

This paper investigates the spread of aggressive corporate tax reporting by modeling a firm's decision to adopt the corporate-owned life insurance (COLI) shelter. I use a sample of known COLI participants to examine whether certain firm characteristics are associated with the decision to adopt a COLI shelter. I find some evidence that firms with higher performancematched discretionary accruals are more likely to adopt a COLI shelter, suggesting a positive relation between aggressive financial reporting and aggressive tax reporting. I also find that firms with greater capital market visibility are less likely to adopt a COLI shelter, consistent with a potential reputational cost for being associated with aggressive tax avoidance activities. Further, my results suggest that COLI adopters are generally R&D intensive firms with low leverage and few foreign operations. In addition to firm specific characteristics, I consider two explanations for the spread of COLI adoption motivated by theory on diffusion of innovations and institutional isomorphism. I investigate whether firms imitate prior COLI adopters and whether COLI adoption spreads through common auditors. My results are not consistent with an imitation vii explanation. Further, my results suggest that having the same auditor as a prior COLI adopter does not increase the likelihood that a firm will adopt COLI.viii Table of PART I 6Chapter The tax shelter industry also distorts allocation of economic resources. Tax shelter activity diverts resources away from the government toward accountants, lawyers and others who develop and promote tax shelters. Moreover, according to theories of corporate tax incidence, engaging in a tax shelter cannot make a corporation, per se, better off. The benefits from reducing the corporation's tax bill will ultimately accrue to its shareholders through higher stock prices, its employees through higher wages, or its customers through lower prices. Exactly how the benefits will be shared is unknown, but Slemrod (2004) Frank et al. 2006). 3 However, ETRs and book-tax differences are noisy measures of aggressive tax reporting. ETRs vary with profitability, industry differences in the reporting of revenue and expenses, and legitimate tax planning opportunities. Consequently, it is difficult to distinguish lower ETRs due to better tax planning from those due to aggressive avoidance or shelter activity. List of TablesTreasury's (1999) report suggests that the growing gap between financial statement income and 2 Many studies rely on Bankman's (2004a) working definition of a tax shelter as a "(1) tax motivated; (2) transaction unrelated to a taxpayer's normal business operations; that (3) under a literal reading of some relevant legal authority; (4) produces a loss for tax purposes in excess of any economic loss; (5) in a manner inconsistent with legislative intent or purpose." See also Bankman (1999).3 Graham and Tucker (2006) identify known tax shelter participants. However, their study focuses on firms' debt policy decisions, no...

show abstract

Studying the relationship between managerial ability and real earnings management in economic and financial crisis conditions

Oskouei

Sureshjani

2020

Int. J Fin Econ

View full text Add to dashboard Cite

Managers with different abilities may make various decisions in economic and financial crisis conditions. Real earnings management, as an important issue, is in the centre of attention for many managers in a crisis condition. In this paper, the role of managerial ability in real earnings management is studied in conditions of economic and financial crisis. This study shows that the managers with higher ability take less usage of real earnings management. The results also indicate that managerial ability, economic and financial crisis have significant and negative effects on real earnings management. This negative effect of managerial ability on real earnings management increases in the conditions of economic crisis. Paying attention to the firms' managerial ability, especially in critical conditions, will lead to more accurate decisions by activist investors.

show abstract

CEO Reputation and Earnings Quality

Cited by 141 publications

References 47 publications

The Effect of Managerial Ability on Future Stock Price Crash Risk: Evidence from Korea

The Effect of Managerial Ability on Future Stock Price Crash Risk: Evidence from Korea

The Spread of Aggressive Corporate Tax Reporting: A Detailed Examination of the Corporate-Owned Life Insurance Shelter

Studying the relationship between managerial ability and real earnings management in economic and financial crisis conditions

Contact Info

Product

Resources

About