Management’s Personal Ideology and Financial Reporting Quality

• In Event: Firm Performance
  In Paper Session: Managerial Accounting

Abstract

We investigate the relation between managers’ personal ideologies and financial reporting quality. We use Federal Elections Commission (FEC) data to develop three proxies for managers’ personal ideologies and test for a relation with two financial reporting quality metrics: discretionary accruals and financial statement restatements. We find that both the absolute value
of discretionary accruals and the probability of restatement decrease in the degree to which
firms’ managers have conservative ideologies. These results are robust in the post-SOX period
and to controls for potential self-selection bias. Our findings contribute to a growing literature demonstrating that business outcomes are partially explained by manager-specific influences including managers’ personal views and priorities.

Authors

• Katherine Campbell, University of North Dakota

• Matthew Adam Notbohm, University of North Dakota

• Adam R Smedema, University of Northern Iowa

• Tianming Zhang, Florida State University