Resumen
Purpose – This research aims to investigate the relationship between Chief Executive Officer (CEO) narcissism and earnings management practices in Brazilian listed companies.
Theoretical framework – Support for the Upper Echelons Theory (UET).
Design/methodology/approach – Using a panel data regression approach, we analyze a sample of 106 companies listed on the B3 from 2010 to 2019. To assess CEO narcissism, we rely on their statements during quarterly conference calls, while earnings management is measured by estimating discretionary accruals based on the Collins model (2017).
Findings – The study uncovers a significant positive correlation between CEO narcissism and earnings management, suggesting that narcissistic CEOs manipulate accounting practices for personal gain, driven by their desire for attention and admiration. Furthermore, the analysis reveals that CEO tenure, board presence, company size, and profitability positively influence earnings management, while the Brazilian economic recession negatively impacts it. The research also innovates by introducing a unique method for measuring narcissism.
Practical & social implications of research – This study contributes to the literature by shedding light on the influence of managers' narcissism, underscoring the importance of considering personality traits when recruiting and supervising executives.
Originality/value – In terms of originality, this research measures the level of narcissism among CEOs using secondary data, adopting a methodology considered more reliable for the study of personality (Mehl et al., 2006). Additionally, it stands out for incorporating factors that have previously been identified in the international literature, but not yet explored in national studies, and that influence earnings management. These factors include CEOs' demographic characteristics, macroeconomic factors, and CEO duality. Thus, this study contributes to the earnings management and behavioral finance literatures and fills an important research gap regarding elements that may influence unethical practices that are harmful to stakeholders in emerging markets.
Keywords – CEO, earnings management, narcissism, accruals.
Citas
Ahmadi, Z., Salehi, M., & Rahmani, M. (2023). The relationship between economic complexity and green economy with earnings management. Journal of Facilities Management, (ahead-of-print).
Aktas, N., de Bodt, E., Bollaert, H., & Roll, R. (2016). CEO Narcissism and the Takeover Process: From Private Initiation to Deal Completion. Journal of Financial and Quantitative Analysis, 51(1), 113–137.
Alhmood, M. A., Shaari, H., & Al-dhamari, R. (2020). CEO Characteristics and Real Earnings Management in Jordan. International Journal of Financial Research, 11(4), 255.
Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60–79.
Almeida-Santos, P. S., Verhagem, J. A., & Bezerra, F. A. (2011). Gerenciamento de resultados por meio de decisões operacionais e a governança corporativa: analise das indústrias siderúrgicas e metalúrgicas brasileiras. Revista de Contabilidade e Organizações, 5(13).
Amernic, J. H., & Craig, R. J. (2010). Accounting as a Facilitator of Extreme Narcissism. Journal of Business Ethics, 96(1), 79–93.
Araújo, V. C., Góis, A. D., Luca, M. M. M. de, & Lima, G. A. S. F. de (2021). CEO narcissism and corporate tax avoidance. Revista Contabilidade & Finanças, 32(85), 80–94.
Azevedo, Y. G. P., Silva, M. C. G. E., & Nakao, S. H. (2024). The moderating role of duality split on the relationship between CEO narcissism and earnings management. Corporate Governance: The International Journal of Business in Society.
Aygun, M., Ic, S., & Sayim, M. (2014). The Effects of Corporate Ownership Structure and Board Size on Earnings Management: Evidence from Turkey. International Journal of Business and Management, 9(12).
Ball, R. (2013). Accounting Informs Investors and Earnings Management is Rife: Two Questionable Beliefs. Accounting Horizons, 27(4), 847–853.
Barbosa, L. (2005). Jeitinho brasileiro. A arte de ser mais igual que os outros (6th ed.). Campus.
Barton, J., & Simko, P. J. (2002). The Balance Sheet as an Earnings Management Constraint. SSRN Electronic Journal.
Bishop, M. L., & Eccher, E. A. (2000). Do Markets Remember Accounting Changes? An Examination of Subsequent Years. SSRN Electronic Journal
Bouaziz, D., Salhi, B., & Jarboui, A. (2020). CEO characteristics and earnings management: empirical evidence from France. Journal of Financial Reporting and Accounting, 18(1), 77–110.
Bowen, R. M., Davis, A. K., & Rajgopal, S. (2002). Determinants of Revenue-Reporting Practices for Internet Firms*. Contemporary Accounting Research, 19(4), 523–562.
Brunell, A. B., Gentry, W. A., Campbell, W. K., Hoffman, B. J., Kuhnert, K. W., & DeMarree, K. G. (2008). Leader Emergence: The Case of the Narcissistic Leader. Personality and Social Psychology Bulletin, 34(12), 1663–1676.
Buchholz, F., Lopatta, K., & Maas, K. (2020). The Deliberate Engagement of Narcissistic CEOs in Earnings Management. Journal of Business Ethics, 167(4), 663–686.
Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126.
Cacciamali, M. C., & Tatei, F. (2016). Mercado de trabalho: da euforia do ciclo expansivo e de inclusão social à frustração da recessão econômica. Estudos avançados, 30, 103-121.
Capalbo, F., Frino, A., Lim, M. Y., Mollica, V., & Palumbo, R. (2018). The Impact of CEO Narcissism on Earnings Management. Abacus, 54(2), 210–226.
Chatterjee, A., & Hambrick, D. C. (2007). It’s All about Me: Narcissistic Chief Executive Officers and Their Effects on Company Strategy and Performance. Administrative Science Quarterly, 52(3), 351–386.
Cheng, Q., Warfield, T., & Ye, M. (2011). Equity Incentives and Earnings Management. Journal of Accounting, Auditing & Finance, 26(2), 317–349.
Chung, C., & Pennebaker, J. (2007). Social communication. In The psychological functions of function words. In K. Fiedler (1st ed., pp. 343–359). Psychology Press.
CODACE. (2017). Comitê de Datação dos Ciclos Econômicos. https://portalibre.fgv.br/sites/default/files/2020-03/comite-de-data_o-de-ciclos-econ_micos-comunicado-de-30_10_2017-_1_.pdf
Collins, D. W., Pungaliya, R. S., & Vijh, A. M. (2017). The Effects of Firm Growth and Model Specification Choices on Tests of Earnings Management in Quarterly Settings. The Accounting Review, 92(2), 69–100.
Cordeiro, F. A., Bressan, V. G. F., Lamounier, W. M., & Barros, L. A. B. D. C. (2018). Desempenho Financeiro das Cooperativas de Crédito Brasileiras e a Recessão Econômica de 2015 no Brasil. XVIII USP International Conference in Accounting, 20.
Craig, R. ., & Amernic, J. (2004). Enron discourse: the rhetoric of a resilient capitalism. Critical Perspectives on Accounting, 15(6–7), 813–852.
D’Souza, M. F., Lima, G. A. S. F. de, Jones, D. N., & Carré, J. R. (2019). Do I win, does the company win, or do we both win? Moderate traits of the Dark Triad and profit maximization. Revista Contabilidade & Finanças, 30(79), 123–138.
Dechow, P. M., & Skinner, D. J. (2000). Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators. SSRN Electronic Journal.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC. Contemporary Accounting Research, 13(1), 1–36.
Dimitras, A. I., Kyriakou, M. I., & Iatridis, G. (2015). Financial crisis, GDP variation and earnings management in Europe. Research in International Business and Finance, 34, 338–354.
El Diri, M., Lambrinoudakis, C., & Alhadab, M. (2020). Corporate governance and earnings management in concentrated markets. Journal of Business Research, 108, 291–306.
Engelen, A., Neumann, C., & Schmidt, S. (2016). Should Entrepreneurially Oriented Firms Have Narcissistic CEOs? Journal of Management, 42(3), 698–721.
Faghekarimi, S., Ohadi, F., Nikoomaram, H., & Royaye, R. (2024). The effect of managers' narcissism on earnings quality in companies listed on the Tehran Stock Exchange, Behavior Psychology Theory Test. Journal of Management Accounting and Auditing Knowledge, 13(49), 295-308.
Fast, L. A., & Funder, D. C. (2008). Personality as manifest in word use: Correlations with self-report, acquaintance report, and behavior. Journal of Personality and Social Psychology, 94(2), 334–346.
Filip, A., & Raffournier, B. (2014). Financial Crisis And Earnings Management: The European Evidence. The International Journal of Accounting, 49(4), 455–478.
Gibbons, R., & Murphy, K. J. (1992). Does Executive Compensation Affect Investment? Journal of Applied Corporate Finance, 5(2), 99–109.
Gounopoulos, D., & Pham, H. (2018). Financial Expert CEOs and Earnings Management Around Initial Public Offerings. The International Journal of Accounting, 53(2), 102–117.
Gumanti, T. A., & Prasetiawati, W. (2012). Board of Commisioner Duality Role, Governance and Earnings Management of Initial Public Offerings in Indonesia. Jurnal Akuntansi Dan Keuangan, 13(2).
Hambrick, D. C., & Mason, P. A. (1984). Upper Echelons: The Organization as a Reflection of Its Top Managers. The Academy of Management Review, 9(2), 193.
Harris, J., & Bromiley, P. (2007). Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation. Organization Science, 18(3), 350–367.
Hazarika, S., Karpoff, J. M., & Nahata, R. (2012). Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics, 104(1), 44–69
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons, 13(4), 365–383.
Hornett, A., & Fredericks, S. (2005). An Empirical and Theoretical Exploration of Disconnections Between Leadership and Ethics. Journal of Business Ethics, 59(3), 233–246.
Hribar, P., Kravet, T., & Wilson, R. (2014). A new measure of accounting quality. Review of Accounting Studies, 19(1), 506–538.
Jackson, A. B. (2018). Discretionary Accruals: Earnings Management ... or Not? Abacus, 54(2), 136–153.
Judge, T. A., Piccolo, R. F., & Kosalka, T. (2009). The bright and dark sides of leader traits: A review and theoretical extension of the leader trait paradigm. The Leadership Quarterly, 20(6), 855–875.
Kets de Vries, M. (2004). Organizations on the Couch: European Management Journal, 22(2), 183–200.
Kontesa, M., Brahmana, R., & Tong, A. H. H. (2021). Narcissistic CEOs and their earnings management. Journal of Management and Governance, 25(1), 223–249.
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163–197.
Li, V. (2019). The effect of real earnings management on the persistence and informativeness of earnings. The British Accounting Review, 51(4), 402–423.
Loomis, C. J. (1999). Lies, damned lies, and managed earnings (Fortune (ed.); 3rd ed.).
Lotfiju, N., Banimahd, B., Nikoomaram, H., & Vakilifard, H. (2024). The role of Auditor’s Narcissism on Reduced Earnings Management. Applied Research in Financial Reporting, 12(2), 281-304.
Martinez, A. L., Lessa, R. C., & Moraes, A. de J. (2013). Remuneração dos auditores perante a agressividade tributária e governança corporativa no Brasil. Revista de Contabilidade e Controladoria, 1(1), 1–11.
Marquez-Illescas, G., & Zhou, L. (2023). CEO Narcissism and Properties of Analysts’ Forecasts. Accounting Horizons, 37(3), 221-241.
McNichols, M. F., & Stubben, S. R. (2018). Research Design Issues in Studies Using Discretionary Accruals. Abacus, 54(2), 227–246.
Mehl, M. R., Gosling, S. D., & Pennebaker, J. W. (2006). Personality in its natural habitat: Manifestations and implicit folk theories of personality in daily life. Journal of Personality and Social Psychology, 90(5), 862–877.
Merchant, K. A., & Rockness, J. (1994). The ethics of managing earnings: An empirical investigation. Journal of Accounting and Public Policy, 13(1), 79–94.
Morf, C. C., & Rhodewalt, F. (1993). Narcissism and Self-Evaluation Maintenance: Explorations in Object Relations. Personality and Social Psychology Bulletin, 19(6), 668–676.
Mulford, C. W., & Comiskey, E. E. (2002). The financial numbers game: detecting creative accounting practices (1st ed.). Wiley.
Nardi, P. C. C., Orsi, L. E., Borges, V. P., & Silva, R. L. M. da. (2018). Influência de práticas Contábeis discricionárias no honorário de auditoria. Enfoque: Reflexão Contábil, 37(3), 55.
Pennebaker, J. W., Mehl, M. R., & Niederhoffer, K. G. (2003). Psychological Aspects of Natural Language Use: Our Words, Our Selves. Annual Review of Psychology, 54(1), 547–577.
Prendergast, C., & Stole, L. (1996). Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning. Journal of Political Economy, 104(6), 1105–1134.
Putri, E. A., & Rusmanto, T. (2019). The Impact of CEO Characteristics on Earnings Per Share and Earnings Management. International Journal of Scientific & Technology Research, 8(10), 5.
Rajgopal, S., & Venkatachalam, M. (2011). Financial reporting quality and idiosyncratic return volatility. Journal of Accounting and Economics, 51(1–2), 1–20.
Raskin, R., Novacek, J., & Hogan, R. (1991). Narcissism, Self-Esteem, and Defensive Self-Enhancement. Journal of Personality, 59(1), 19–38.
Ronen, J., & Yaari, V. (Lewinstein). (2008). Earnings management: Emerging Insights in Theory, Practice, and Research (1st ed.). Springer Science.
Roodposhti, F. R., & Chashmi, S. A. N. (2010). The Effect of Board Composition and Ownership Concentration on Earnings Management: Evidence from IRAN. International Journal of Economics and Management Engineering, 4(6), 673–679.
Sarkar, J., Sarkar, S., & Sen, K. (2008). Board of Directors and Opportunistic Earnings Management: Evidence from India. Journal of Accounting, Auditing & Finance, 23(4), 517–551.
Siregar, S. V., & Utama, S. (2008). Type of earnings management and the effect of ownership structure, firm size, and corporate-governance practices: Evidence from Indonesia. The International Journal of Accounting, 43(1), 1–27.
Soto, R. E. D. A. (2013). Impunidade (?) Nos crimes de colarinho branco: a (in)eficiência da reação punitiva no delito de evasão de divisas no âmbito do TRF4 [Pontifícia Universidade Católica do Rio Grande do Sul,].
Talbi, D., Omri, M. A., Guesmi, K., & Ftiti, Z. (2015). The Role Of Board Characteristics In Mitigating Management Opportunism: The Case Of Real Earnings Management. Journal of Applied Business Research (JABR), 31(2), 661.
Ting, I. W. K., Azizan, N. A. B., & Kweh, Q. L. (2015). Upper Echelon Theory Revisited: The Relationship between CEO Personal Characteristics and Financial Leverage Decision. Procedia - Social and Behavioral Sciences, 195, 686–694.
Yim, S. (2013). The acquisitiveness of youth: CEO age and acquisition behavior. Journal of Financial Economics, 108(1), 250–273.
Una vez aprobada la publicación del artículo, el/los autor/es cede/n los derechos de copyright a la Revista Brasileira de Gestão de Negócios – RBGN.
Es OBLIGATORIO que los autores envíen a la RBGN el formulario de Cesión de Derechos de Autor debidamente cumplimentado y firmado según el modelo: [Derechos de autor]
Las condiciones de la Cesión de Derechos de Autor indican que la Revista Brasileira de Gestão de Negócios – RBGN goza a título gratuito y en carácter definitivo de los derechos de autor patrimoniales de los artículos publicados por ella. A pesar de la Cesión de los Derechos de Autor, la RBGN faculta a los autores al uso de estos derechos sin restricciones.
Los autores se responsabilizan de los textos publicados en la RBGN.
La RBGN adopta el modelo de licencia CC-BY Creative Commons Attribution 4.0, permitiendo la redistribución y reutilización de los artículos garantizando que la autoría esté debidamente acreditada.