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CEOs’ experience of the Great Chinese Famine and accounting conservatism

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  • Jun Hu
  • Wenbin Long
  • Gary Gang Tian
  • Daifei (Troy) Yao

Abstract

This study investigates how a CEO's early‐life experience of the Great Chinese Famine affects corporate accounting conservatism. We find that companies whose CEOs had experienced famines in early life adopted more conservative accounting policies. This famine experience effect is more pronounced in high uncertainty environments proxied by non‐SOEs, politician turnovers and the adoption of International Financial Reporting Standards (IFRS). Additional tests indicate that CEOs with famine experience tend to support conservative accounting practices for contingencies and accelerate the recognition of asset impairments in negative events. Overall, consistent with imprinting theory, our results highlight the role of early‐life traumatic experiences in shaping CEOs’ risk preferences and financial reporting policies.

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  • Jun Hu & Wenbin Long & Gary Gang Tian & Daifei (Troy) Yao, 2020. "CEOs’ experience of the Great Chinese Famine and accounting conservatism," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1089-1112, October.
    • Handle: RePEc:bla:jbfnac:v:47:y:2020:i:9-10:p:1089-1112
    DOI: 10.1111/jbfa.12485
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    Cited by:

    1. Li, Chengai & Pan, Lin & Chan, Kam C., 2023. "Does CEOs' early-life experience of the Great Chinese Famine always benefit stakeholders? The case of trade credit," Finance Research Letters, Elsevier, vol. 51(C).
    2. Qing Wan & Xiaoke Cheng & Kam C. Chan & Shenghao Gao, 2021. "Born to innovate? The birth‐order effect of CEOs on corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1846-1888, October.
    3. Rui Wang, 2021. "The attention of long‐term institutional investors and timely loss recognition," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1596-1629, October.
    4. Dayuan Li & Chen Huang & Ding Wang, 2023. "How Chief Executive Officers’ first-hand experience of the Great Chinese Famine affects risk-taking?," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    5. Jarkko Peltomäki & Jukka Sihvonen & Steve Swidler & Sami Vähämaa, 2021. "Age, gender, and risk‐taking: Evidence from the S&P 1500 executives and market‐based measures of firm risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1988-2014, October.
    6. Xue, Fei & Wang, Xin & Xie, Yan & Zhang, Weihua, 2022. "Does CEO's early life experience affect corporate bond yield spread? Evidence from China's great famine," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1012-1024.
    7. Cui, Xin & Sun, Mengyue & Sensoy, Ahmet & Wang, Panpan & Wang, Yaqi, 2022. "Top executives’ great famine experience and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 59(C).
    8. Wu, Junfeng & Liu, Baohua & Chang, Samuel & Chan, Kam C., 2022. "Effects of air pollution on accounting conservatism," International Review of Financial Analysis, Elsevier, vol. 84(C).

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