The influence of CEO and CFO power on accruals and real earnings management

Terry A. Baker, Thomas J. Lopez (), Austin L. Reitenga and George W. Ruch
Additional contact information
Terry A. Baker: Wake Forest University
Thomas J. Lopez: University of Alabama
Austin L. Reitenga: University of Alabama
George W. Ruch: University of Oklahoma

Review of Quantitative Finance and Accounting, 2019, vol. 52, issue 1, No 10, 325-345

Abstract: Abstract In this study, we examine the effect of CEO and CFO power on both accruals and real earnings management (AEM and REM, respectively), and the extent to which CEO and CFO power mitigate the effect of one another on AEM and REM. We further examine whether the passage of the Sarbanes-Oxley Act (SOX) altered these effects. In the pre-SOX period, we find that AEM (REM) is greater when the CEO (CFO) is powerful relative to the CFO (CEO). In the post-SOX period, however, we find that the effect of relative CEO power on AEM subsides, whereas the effect of relative CFO power on REM persists. Additionally, we find evidence to suggest that powerful CFOs inhibit the AEM preferences of powerful CEOs in both the pre- and post-SOX periods. Finally, we find evidence to suggest that powerful CEOs inhibit the REM preferences of powerful CEOs in the pre-SOX period, but not in the post-SOX period. Collectively, our results suggest that the power of the CEO relative to the CFO is an important factor in the both the type and magnitude of earnings management.

Keywords: Earnings management; Accruals; Real earnings management; CEO power; CFO power (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-018-0711-z Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:52:y:2019:i:1:d:10.1007_s11156-018-0711-z

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-018-0711-z

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().