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

62 Pages Posted: 13 Oct 2018 Last revised: 20 Dec 2020

See all articles by Pascale Lapointe‐Antunes

Pascale Lapointe‐Antunes

Brock University - Faculty of Business

Kevin J. Veenstra

McMaster University - DeGroote School of Business

Kareen Brown

Brock University - Goodman School of Business

Heather Li

Bentley University - Department of Accountancy

Date Written: December 15, 2020

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.

Keywords: Upper echelons theory, earnings management, Honesty-Humility, face-based judgments.

JEL Classification: D22, D91, M12, M14, O51

Suggested Citation

Lapointe-Antunes, Pascale and Veenstra, Kevin J. and Brown, Kareen and Li, Heather, Welcome to the Gray Zone: Shades of Honesty and Earnings Management (December 15, 2020). Available at SSRN: https://ssrn.com/abstract=3260712 or http://dx.doi.org/10.2139/ssrn.3260712

Pascale Lapointe-Antunes

Brock University - Faculty of Business ( email )

St. Catharines, Ontario L2S 3A1
Canada
905-688-5550, 5251 (Phone)
905-688-9779 (Fax)

HOME PAGE: http://www.bus.brocku.ca/faculty/faculty.php?id=139&d=Accounting

Kevin J. Veenstra (Contact Author)

McMaster University - DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Kareen Brown

Brock University - Goodman School of Business ( email )

500 Glenridge Avenue
International Business and Strategy
St. Catherine's, Ontario L2S 3A1
Canada

Heather Li

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
212
Abstract Views
2,241
Rank
268,193
PlumX Metrics