CEO Characteristics and Earnings Management: Evidence from Mergers and Acquisitions

• In Event: Breakfast and Roundtable
  In Roundtable: Roundtable 1

Abstract

Previous research suggests that share-financed acquirers inflate their earnings before merger and acquisition announcements. The existing literature also indicates that characteristics of chief executive officers (CEO) could affect earnings management. In this study, we extend prior studies by examining the relationships between CEO characteristics and accrual earnings management in share-financed acquirers before mergers and acquisitions. We find that CEOs with high financial expertise and high reputation are associated with lower abnormal accruals in stock acquirers. The correlations are statistically significant and consistently exist in the first year before deal announcements. The findings are robust as we measure abnormal accruals in different ways and employ different models. The evidence suggests that CEO characteristics have an impact on earnings management in the contexts of mergers and acquisitions and have some implications for practitioners.

Author

• Thai Quoc Nguyen, University of East London