CEOs’ Great Chinese Famine Experience and Accounting Conservatism: Evidence from China

51 Pages Posted: 23 Jan 2018

See all articles by Jun Hu

Jun Hu

Jinan University - Management School

Wenbin Long

Guangdong Polytechnic Normal University

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Faculty of Business and Economics

Troy Yao

Queensland University of Technology - School of Accountancy

Date Written: December 1, 2017

Abstract

This paper intends to link CEOs’ adverse early-life experiences to accounting policy choice, by investigating whether a CEO’s Great Chinese Famine experience impacted on corporate accounting conservatism. Our results show that companies whose CEOs had famine experience in their early life used more conservative accounting. We also find that the positive association between the CEO’s famine experience and accounting conservatism is moderated by firm ownership structure and environmental uncertainties. Additional tests suggest that the CEOs who experienced famine during their youth had a greater impact on accounting conservatism. By using the exogenous variation in local severity of the famine, we confirm the causal relationship between CEOs’ early-life famine experience and the level of accounting conservatism. Our study contributes to the accounting policy choice literature, and results are robust for several other robustness tests. We argue that the CEO will apply the risk sensitivity learned from the famine experience to the company’s accounting policy decisions to meet the obligations of the contracting parties and other stakeholders.

Keywords: Accounting Conservatism, CEO life experience, corporate governance

JEL Classification: M41

Suggested Citation

Hu, Jun and Long, Wenbin and Tian, Gary Gang and Yao, Troy, CEOs’ Great Chinese Famine Experience and Accounting Conservatism: Evidence from China (December 1, 2017). Asian Finance Association (AsianFA) 2018 Conference. Available at SSRN: https://ssrn.com/abstract=3107451 or http://dx.doi.org/10.2139/ssrn.3107451

Jun Hu

Jinan University - Management School ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

Wenbin Long

Guangdong Polytechnic Normal University ( email )

293 Zhongshan Middle Ave
Guangzhou, Tianhe 510665
China

Gary Gang Tian (Contact Author)

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Faculty of Business and Economics ( email )

Australia

Troy Yao

Queensland University of Technology - School of Accountancy ( email )

2 George Street
Brisbane, Queensland 4000
Australia

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