CEO reputation and earnings quality

• 成果类型: Article; Proceedings Paper
• 署名作者: Francis, Jennifer; Huang, Allen H.; Rajgopal, Shivaram; Zang, Amy Y.
• 署名单位: Duke University; University of Washington; University of Washington Seattle; University of Rochester
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1506/car.25.1.4
• 发表日期: 2008
• 页码: 109-+
• 关键词: empirical-research; performance; INFORMATION; management; accruals; BOARD; cost; COMPENSATION; succession; disclosure

摘要

We examine the association between chief executive officer (CEO) reputation (proxied by the extent of press coverage) and the quality of the firm's earnings (proxied by two accruals-based measures). We test three explanations for an association between these constructs: the efficient contracting hypothesis suggests that reputed CEOs are associated with good earnings quality, while the rent extraction and matching explanations argue that reputed CEOs are associated with poor earnings quality. Using a simultaneous equations system to capture the endogeneity of the constructs, we find (consistent with the rent extraction and matching arguments) that more reputed CEOs are associated with poorer earnings quality than are less reputed CEOs. Further tests find little support for the rent extraction hypothesis. We conclude that the reason more reputed CEOs are associated with poor earnings quality firms is that such firms require more talented managers and, therefore, employ more reputed CEOs.