Méthodes de gestion des résultats et affiliation politique des dirigeants

Özgür Arslan-Ayaydin, James Thewissen and Wouter Torsin

ACCRA, 2022, vol. 28, issue 2, 83-128

Abstract: This paper examines whether CEO risk aversion—proxied by their political affiliation—explains the method used to manage earnings. We argue that, even though real earnings management can have severe long-term consequences for firm performance, Republican managers are likely to prefer real over accrual-based earnings management because the former incurs significantly lower litigation risk costs than the latter and is relatively more difficult to detect. Based on a sample of more than 20,000 firm-year observations, we find that firms led by Republican (i.e., more risk-averse) CEOs tend to manage their earnings through real activities manipulation, while those led by Democratic (i.e., more risk-taking) CEOs tend to favor accrual-based earnings management. We also show that the positive (negative) relation between Republican-leaning managers and real (accrual-based) earnings management is more positive (less negative) for CEOs whose compensation is more oriented toward risk-taking. Code JEL : M41.

Keywords: Accrual-based earnings management; CEO risk aversion; Political affiliation; Political donations; Real activities manipulation. (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2022
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