Does board–CEO age similarity affect earnings management? An empirical analysis from M&A contexts

Thang Nguyen (), Salem Alhababsah, Thai Nguyen and Alaa Alhaj-Ismail
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Thang Nguyen: Coventry University
Salem Alhababsah: Princess Sumaya University for Technology
Thai Nguyen: Coventry University
Alaa Alhaj-Ismail: Coventry University

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 3, No 4, 1105-1128

Abstract: Abstract This paper investigates whether CEO–board age similarity has an impact on firms’ earnings management in M&A contexts. We argue that CEO–board age similarity may have an impact on earnings management through two main roles of the board in M&A, i.e., monitoring and advising roles. On the one hand, board–CEO age similarity may improve the quality of the board’s advice on M&A and thus reduce the CEO’s need to manipulate earnings. On the other hand, board–CEO age similarity may trigger friendship, therefore weaken the monitoring function of the board. Using the sample of all share-financed M&A deals in the UK from 2001 to 2018, we find a lower level of earnings management in firms with higher board–CEO age similarity. The evidence thus highlights the importance of the advisory role of the board in M&A. Our findings have an important contribution to the corporate governance literature and also have implications for practice.

Keywords: Board of directors; CEO; Board of directors–CEO age similarity; Earnings management; M&A (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01327-8

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