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Welcome to the Gray Zone: Shades of Honesty and Earnings Management

Author

Listed:
  • Pascale Lapointe-Antunes

    (Brock University)

  • Kevin Veenstra

    (McMaster University)

  • Kareen Brown

    (Brock University)

  • Heather Li

    (Bentley University)

Abstract

We examine the influence of face-based judgments of CFO and CEO honesty on earnings management for the largest publicly traded companies in America. After controlling for incentives and opportunities to manage earnings, CFOs perceived to be less honest engage in higher levels of accruals earnings management and real earnings management. The beneficial impact of perceived honesty on earnings quality is most pronounced when both the CFO and the CEO are perceived to be more honest. Findings are consistent with our conjecture that both the CFO and CEO contribute to a firm’s financial reporting environment.

Suggested Citation

  • Pascale Lapointe-Antunes & Kevin Veenstra & Kareen Brown & Heather Li, 2022. "Welcome to the Gray Zone: Shades of Honesty and Earnings Management," Journal of Business Ethics, Springer, vol. 177(1), pages 125-149, April.
    • Handle: RePEc:kap:jbuset:v:177:y:2022:i:1:d:10.1007_s10551-020-04713-z
    DOI: 10.1007/s10551-020-04713-z
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    References listed on IDEAS

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