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CEO profile and earnings quality

Author

Listed:
  • Tri Tri Nguyen

    (University of Brighton
    University of Economics Ho Chi Minh City)

  • Chau Minh Duong

    (University of East London
    Ho Chi Minh City Open University)

  • Sunitha Narendran

    (University of Roehampton)

Abstract

This paper introduces the PSCORE, which aggregates nine personal characteristics of chief executive officers (CEOs), to signal the quality of earnings. The PSCORE is a composite score based on publicly available data on CEOs. The study reports strong positive relationships between the PSCORE and two different proxies for earnings quality, (1) discretionary accruals and (2) financial statement errors, measured by deviations of the first digits of figures reported in financial statements from those expected by Benford’s Law. Further analyses indicate that the relationships between the PSCORE and the proxies for earnings quality become more pronounced when CEOs have high equity-based compensation incentives. The findings have some implications for practitioners.

Suggested Citation

  • Tri Tri Nguyen & Chau Minh Duong & Sunitha Narendran, 2021. "CEO profile and earnings quality," Review of Quantitative Finance and Accounting, Springer, vol. 56(3), pages 987-1025, April.
    • Handle: RePEc:kap:rqfnac:v:56:y:2021:i:3:d:10.1007_s11156-020-00916-7
    DOI: 10.1007/s11156-020-00916-7
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    More about this item

    Keywords

    Earnings quality; Benford’s law; Chief executive officers;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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