Welcome to the Gray Zone: Shades of Honesty and Earnings Management

Pascale Lapointe-Antunes (), Kevin Veenstra (), Kareen Brown () and Heather Li ()
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Pascale Lapointe-Antunes: Brock University
Kevin Veenstra: McMaster University
Kareen Brown: Brock University
Heather Li: Bentley University

Journal of Business Ethics, 2022, vol. 177, issue 1, No 8, 125-149

Abstract: Abstract We examine the influence of face-based judgments of CFO and CEO honesty on earnings management for the largest publicly traded companies in America. After controlling for incentives and opportunities to manage earnings, CFOs perceived to be less honest engage in higher levels of accruals earnings management and real earnings management. The beneficial impact of perceived honesty on earnings quality is most pronounced when both the CFO and the CEO are perceived to be more honest. Findings are consistent with our conjecture that both the CFO and CEO contribute to a firm’s financial reporting environment.

Keywords: Upper echelons theory; Earnings management; Honesty-humility; Face-based judgments; D22; D91; M12; M14; O51 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:177:y:2022:i:1:d:10.1007_s10551-020-04713-z

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DOI: 10.1007/s10551-020-04713-z

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