CEO Sensation Seeking and Accounting Conservatism

Posted: 5 Oct 2018

See all articles by Xiaohua Fang

Xiaohua Fang

Georgia State University - School of Accountancy

Le Luo

School of Management, Huazhong University of Science and Technology

Jeffrey Pittman

Memorial University of Newfoundland (MNU) - Faculty of Business Administration

Hong Xie

University of Kentucky - Von Allmen School of Accountancy

Date Written: September 1, 2018

Abstract

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

Suggested Citation

Fang, Xiaohua and Luo, Le and Pittman, Jeffrey A. and Xie, Hong, CEO Sensation Seeking and Accounting Conservatism (September 1, 2018). Available at SSRN: https://ssrn.com/abstract=3260855

Xiaohua Fang (Contact Author)

Georgia State University - School of Accountancy ( email )

P.O. Box 4050
Atlanta, GA 30302-4050
United States

Le Luo

School of Management, Huazhong University of Science and Technology ( email )

No. 1037, Luoyu Road, Hongshan District
Wuhan, Hubei 430074
China

Jeffrey A. Pittman

Memorial University of Newfoundland (MNU) - Faculty of Business Administration ( email )

St. John's, Newfoundland A1B 3X5
Canada
709-737-3100 (Phone)
709-737-7680 (Fax)

Hong Xie

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
(859) 257-4648 (Phone)
(859) 257-3654 (Fax)

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