The effect of CEO Inside debt holdings on financial reporting quality

• In Event: Executive Compensation I

Abstract

This study investigates the effect of CEO inside debt holdings on financial reporting quality. I find that higher CEO inside debt holdings are associated with lower abnormal accruals, higher accruals quality, a lower likelihood of an earnings misstatement, and a lower incidence of earnings benchmark beating, suggesting that CEO inside debt promotes high financial reporting quality. Additional analyses reveal that (i) CEO inside debt holdings reduce firm-specific stock price crash risk, and that (ii) auditors are less likely to report a material internal control weakness for firms that have large CEO inside debt.

Author

• Guanming He, University of warwick/Nanyang Technological University