Do CEO social connections promote corporate malpractices? Evidence from classification shifting

Malikov, Kamran; Gaia, Silvia

doi:10.1080/01559982.2021.1975616

Cited by 11 publications

(3 citation statements)

References 57 publications

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“…Khaki et al (2021) showed that the social pressures of the stakeholders have a positive and significant effect on aggressive financial reporting. Malikov and Gaia (2021) find that find that CEOs with a larger number of external connections are more likely to engage in classification shifting. Barani et al (2022) show that the obedience social pressure has positive and significant effect on incorrect decisions in providing financial reporting.…”

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 83%

The moderating role of financial managers’ honesty-humility on aggressive financial reporting: evidence from Iran

Taki

Soroushyar²

2023

IJOES

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Purpose The purpose of this study is to investigate the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior. Design/methodology/approach To test the research hypotheses, a scenario-based questionnaire taken from Brink et al. (2018) was used. Using a cross-sectional survey design, the authors collected primary data of 160 financial managers of firms in Iran using structured questionnaires. The research sample selected was based on Cohen et al.’s (2000) table. To test the research hypotheses, analysis of variance was used. Findings The results showed that increasing honesty-humility of financial managers decreases the impact of social pressure and risk appetite interaction on aggressive financial reporting. In addition, the results of further analysis showed that reducing the honesty-humility of financial managers increases the impact of risk appetite on aggressive financial reporting. Moreover, the results indicate that reducing the honesty-humility of financial managers increases the impact of social pressure on aggressive financial reporting. Research limitations/implications This finding provides significant evidence for auditor, managers and policymakers in Iran. Policymakers, auditor and company managers can emphasize compliance with the code of ethics, internal control and corporate governance to increase ethics and reduce negative economic consequences. Originality/value To the best of the authors’ knowledge, this is the first case in an emerging economy to survey the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior. Also, this study contributes to understanding how factors at the individual, social and organizational level combine to influence financial managers’ aggressive financial reporting behavior.

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Section: Related Literature and Hypotheses Developmentmentioning

confidence: 83%

The moderating role of financial managers’ honesty-humility on aggressive financial reporting: evidence from Iran

Taki

Soroushyar²

2023

IJOES

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“…We control for the degree of financial leverage because levered firms engaged in expense shifting and revenue shifting to avoid violation of debt covenants (Fan et al, 2019; Malikov et al, 2019). Similarly, following many prior studies (for instance, Malikov and Gaia, 2021; Zalata and Roberts, 2016), we control for profitability as a scale measure. We control for the firm’s age because young firms are highly incentivized to favorable influence their capital providers toward their operational efficiency through earnings management.…”

Section: Methodsmentioning

confidence: 99%

Do shifting practices vary across the firm life cycle?

Bansal

2022

Australian Journal of Management

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Prior research documents that managers engage in revenue shifting and expense shifting to report inflated operating performance of firms. This study extends this research in a new direction by investigating the relationship between revenue shifting and expense shifting across the firm life cycle. The study posits and finds that firms during the low life cycle stages (particularly, introductory and growth stage) prefer expense shifting over revenue shifting, whereas firms during the high life cycle stages (particularly, mature and decline stage) prefer revenue shifting over expense shifting for managing earnings, implying that firms choose the shifting tool based on ease, need, and relative advantage of each tool. Our subsequent tests suggest that the effect of expense (revenue) shifting is more pronounced among low (high) life cycle stage firms when they are small (large) and young (old). These results are robust to control for other tools of earnings management, and alternative measures of shifting practices and firm life cycle. The findings aware auditors and analysts of the shifting practices of firms operating at high and low life cycle stages. JEL Classification: M41, M48

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“…The accumulation of social capital can bring capital, talent, knowledge, and other valuable elements to enterprises, thereby encouraging proactive risk‐taking activities (Abernethy et al., 2019). A CEO's wealth of social capital enhances their ability to integrate resources, which, in turn, can stimulate risk‐taking activities (Malikov & Gaia, 2021). The richer a CEO's social capital, the stronger their capacity for resource integration, thus promoting risk‐taking activities.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

CEO social capital, business environment, and the level of corporate risk‐taking in China

Su,

Fu,

Zou

et al. 2023

Accounting & Finance

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We find a significant positive role of chief executive officer (CEO) social capital on the level of corporate risk‐taking for Chinese listed firms from 2008 to 2019. We reveal that a better business environment tends to reduce this positive relationship. In addition, we also find that corporate innovations provide moderation effects on the relationship. Further analysis of heterogeneity tests on firm characteristics suggests that CEO social capital's effect on corporate risk‐taking is significant and stronger for non‐state‐owned enterprises, firms with fewer female directors on their board, and firms with more cash holdings.

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Do CEO social connections promote corporate malpractices? Evidence from classification shifting

Cited by 11 publications

References 57 publications

The moderating role of financial managers’ honesty-humility on aggressive financial reporting: evidence from Iran

The moderating role of financial managers’ honesty-humility on aggressive financial reporting: evidence from Iran

Do shifting practices vary across the firm life cycle?

CEO social capital, business environment, and the level of corporate risk‐taking in China

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