The effect of the CEO’s characteristics on EM: Evidence from Jordan

Abstract

Purpose
Purpose – The study aims to examine the effect of CEO’s personal characteristics on earnings management (EM) practices.

Design/methodology/approach
Design/methodology/approach – We use panel data for 201 non-financial companies listed on the Amman Stock Exchange (ASE) for the period 2008 to 2013. We employ random effect models to test our hypothesis and extent the analysis to family vs non-family.

Findings
Findings – The study finds a positive relation between CEO’s overconfidence and EM practices in Jordan. Moreover, the findings reveal that managers in family-companies are more likely to engage in EM practices than non-family-companies. The findings shed more light on the intricate relationship between CEO’s characteristics, the decision-making process and financial reporting.

Practical implications
Practical implications – results of this study could be beneficial for a number of users of financial information such as, investors, auditors, regulators, lenders, as well other players in the capital market to make right decisions.

Originality/value
Originality/value –a literature review find that much less studies have investigated the relationship between EM practices and personal CEO characteristics (gender and overconfidence) in developing countries such as Jordan. Furthermore, no study yet has examined the influence of CEO age on EM practices. We extend previous literature by providing empirical evidence about effect of some personal CEO’s characteristics on EM practices.