부산대학교 도서관

There’re two methods for firms to manage earnings: one is accrual-based the other is real activities-based. Nowadays, more and more managers conduct the latter practice to depart the earnings from normal level in order to avoid reporting losses. They try to trick firms’ stakeholders into believing some financial goals have been achieved. The mainly objective of this research is to figure out whether CEO characteristics, such as optimism, tenure, age, incentive and compensation have relationship with the level of real earnings management. I want to know whether firms with some specific characteristic of CEOs are more likely to engage in manipulating earnings. The sample included in the study is listed firms from COMPUSTAT database between 1992 and 2018 and firms in regulated industries and banks and financial institutions are excluded. The empirical results show that firms with overconfident, lower compensation CEOs are more likely to do income-increasing earnings management. In the situation in which nonlinear relationship are taken into account and discover that CEOs’ age is the only characteristic that has nonlinear relationship with real earnings management. Finally, interaction term is included in my analysis, the results show that if CEOs are in firms with higher leverage, the level of real earnings management will be lower than firm with lower leverage, especially for young CEOs; The influence of CEOs’ tenure on income-increasing earnings management is more prominent in small firms than large firms; CEOs’ with higher incentive ratio and compensation will be less likely to conduct income-increasing real earnings management while ROE ratio increases.