CEO Sensation Seeking and Accounting Conservatism
Posted: 5 Oct 2018
Date Written: September 1, 2018
Psychological and upper echelons theories suggest that CEOs with the personality trait of sensation seeking shape corporate policies. In gauging sensation seeking with whether the CEO holds a pilot license, we examine its importance to firms’ accounting conservatism. Our evidence implies that CEO sensation seeking is negatively associated with accounting conservatism after controlling for several other CEO characteristics. This result holds in extensive sensitivity analysis, including in confronting potential endogeneity threats with several techniques. Finally, in cross-sectional analysis, we find no evidence that the negative relation between CEO sensation seeking and accounting conservatism varies systematically with external monitoring and CEO power levels, consistent with prior research implying that intrinsic motivation from sensation seeking dominates potential constraints from extrinsic forces. Our analysis highlights an important economic outcome stemming from CEO sensation seeking.
Keywords: CEO personality traits; sensation seeking; accounting conservatism
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