The Effect of CEO Overconfidence on Accruals and Real Earnings Management

• Main Authors: I Ching Chu, 朱怡靜
• Other Authors: C. L. Liu
• Format: Others
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/2vfspt

碩士 === 長庚大學 === 工商管理學系 === 102 === Using data on public traded Taiwan companies from 2003 to 2012, this study investigates the effect of CEO overconfidence on accruals (AEM) and real earnings management (REM).Overconfidence measures are following Malmandier and Tate(2005) modified model and Campbell, et al.(2011)&;Ahmed, et al.(2013) modified model, Earnings measures are following DeFond and Jiambalvo (1994) model and Roychowdhury (2006) model. The purpose is examine the impact of CEO overconfidence on AEM and REM choices. The empirical results show that there has a significant results between the overconfidence proxies and REM proxies. This suggests that overconfident managers are less likely to engage in AEM compared to the other managers. As they are more concerned about damaging their reputation, and AEM is more likely to be detected and is prone to outside scrutiny. Some research also show that REM is prior to AEM, and AEM does not affect operating activities but REM does, which affects firm’s future performance significantly, Roychowdhury(2004) finds that cash flows can be affected through real activities operations from operating activities.