Managers: Their Effects on Accruals and Firm Policies
Journal of Business Finance & Accounting, Forthcoming
54 Pages Posted: 26 Aug 2009 Last revised: 15 Aug 2017
Date Written: November 11, 2012
This paper investigates whether top executives have significant individual-specific effects on accruals that cannot be explained by firm characteristics. Exploiting 37 years of individual executive and firm data, we find that individual executives play a significant role in determining firms’ accruals. We examine whether executives’ effects on accruals are related to their personal styles on firm policies, investment, financing and operating decisions. Our results show that individual executives’ effects on accruals are more correlated with their operating decisions than investment and financing decisions. We next investigate whether managers also have a personal style for directly affecting accruals, themselves. We compare effects exerted by CEOs to CFOs. We find CEOs are more likely to affect accruals through firm policy decisions and CFOs are more likely to affect accruals through accounting decisions. CFOs tend to report more “solid” earnings than CEOs, i.e., CFOs are more likely to push accruals to zero.
Keywords: Accruals, Manager Effects
JEL Classification: G30, M41
Suggested Citation: Suggested Citation