Research on the Impact Mechanism of Top Management Team Characteristics on Earnings Management

SYNOPSIS Using a sample of Chinese A-share listed firms from 2000 to 2015, we investigate the association between a firm's use of earnings management strategies and the characteristics of its top management team. Our findings suggest that several demographic characteristics (i.e., age, gender, educational level, and financial work experience) of the entire team, as well as of the CEO/CFO and other team members separately, are significantly associated with both accrual-based and real-activities-based earnings management; these, in turn, may affect the quality of the firm's financial reporting. Our results are consistent with the predictions of the upper echelons theory and have implications for various stakeholders in corporate financial reporting, as well as providing insights to those responsible for selecting and developing upper-level executives. JEL Classifications: M40; M41. Data Availability: The data used in this paper are derived from public sources.

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Top Management Team Characteristics and Accrual-Based Earnings Management

The International Journal of Accounting ◽

10.1016/j.intacc.2018.11.004 ◽

2018 ◽

Vol 53 (4) ◽

pp. 314-334 ◽

Cited By ~ 6

Author(s):

Yu-Ting Hsieh ◽

Tsung-Kang Chen ◽

Yi-Jie Tseng ◽

Ruey-Ching Lin

Keyword(s):

Earnings Management ◽

Top Management Team ◽

Management Team ◽

Top Management ◽

Team Characteristics

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Top Management Team Characteristics and Financial Reporting Quality

The Accounting Review ◽

10.2308/accr-52360 ◽

2019 ◽

Vol 94 (5) ◽

pp. 349-375 ◽

Cited By ~ 3

Author(s):

Dana Zhang

Keyword(s):

Financial Reporting ◽

Top Management Team ◽

Reporting Quality ◽

Economic Incentives ◽

Individual Characteristics ◽

Management Team ◽

Financial Reporting Quality ◽

Top Management ◽

Team Characteristics ◽

The Impact

ABSTRACT The accounting literature often views managers as individuals whose financial reporting decisions are determined by their economic incentives and individual characteristics. However, managers typically work in a team and most decisions have at least some input from other members of the team. This study examines the impacts of two top management team (TMT) characteristics on financial reporting quality. The results indicate that background homogeneity and long-shared working experience are each distinctly related to a higher likelihood of restatements. Additional tests document that team homogeneity and shared experience also are positively associated with discretionary accruals for firms with income-increasing earnings management incentives. Moreover, the impact of TMTs on financial reporting quality varies with the proportion and tenure of independent directors. These findings indicate that top management team characteristics are important determinants of financial reporting quality. JEL Classifications: G34; M14; M41; M54.

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