The influence of CEO's characteristics on the quality of financial statements of industrial group companies listed on the Ho Chi Minh City stock exchange
Main Article Content
Abstract
The study focuses on the influence of chief executive officer (CEO) characteristics on the financial reporting quality of industrial group companies listed on the Ho Chi Minh City Stock Exchange (HOSE). Balanced panel data with 267 observations of 89 industrial group companies listed on HOSE for 3 years (2018 - 2020) along with panel data regression methods POOL, FEM, REM, and FGLS are used to test the research model. The analysis results show that the financial reporting quality of industrial group companies is positively affected by the CEO’s ownership ratio, CEO's compensation and negatively affected by the CEO's age and CEO duality. It is recommended that industrial group companies should encourage CEOs to own shares of the company, encourage CEO salary, bonus increases, and discourage hiring or appointing CEOs who are older and need to separate the position of Chairman with the CEO to increase the quality of financial reporting.
Article Details
Keywords
Behavioral accounting, CEO’s characteristics, Financial reporting quality
References
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Armstrong, C.S., Jagolinzer, A.D., Larcker, D.F. (2010). Chief Executive Officer Equity Incentives and Accounting Irregularities. Journal of Accounting Research, 48(2), 225-271.
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Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of Accounting and Economics, 31(1-3), 77-104.
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Beekes, W., Pope, P., Young, S. (2004). The link between earnings timeliness, earnings conservatism and board composition: evidence from the UK. Corporate Governance: An International Review, 12(1), 47-59.
Beest, F. V., Braam, G. J. M., & Boelens, S. (2009). Quality of financial reporting: measuring qualitative characteristics. NICE Working Paper; 09-108. http://www.ru.nl/nice/workingpapers.
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Dechow, P.M., Sloan, R.G., Sweeney, A.P. (1996). Causes and Consequences of Earnings Management Manipulation: An Analysis of firm Subject to Enforcement Action by SEC. Contemporary Accounting Research, 13(1), 1-36.
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Fama, E.F., & Jensen, M.C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Fan, J. P., Wong, J. (2002). Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia. Journal of Accounting and Economics, 33(3), 401-425.
Firth, M., Fung, P. M., & Rui, O. M. (2007). Ownership, two-tier Board Structure, and the Informativeness of Earnings: Evidence from China. Journal of Accounting and Public Policy, 26(4), 463-496.
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Huang, H.W., Rose-Green, E., & Lee, C. C. (2012). CEO Age and Financial Reporting Quality. Accounting Horizons, 26(4), 725–740.
Bamahros, H., & Wan-Hussin, W. N. (2016). Types of institutional investors and financial reporting timeliness: Empirical study in Malaysia. In International Conference on Accounting Studies (ICAS).
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Isidro, H., & Gonçalves, L. (2011). Earnings management and CEO characteristics in Portuguese firms. Corporate Ownership and Control, 1(1), 87-95.
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Kazemian, S., & Sanusi, Z. M. (2015). Earnings management and ownership structure. Procedia Economics and Finance, 31, 618-624. https://doi.org/10.1016/S2212-5671(15)01149-1.
Kim, H. J., & Yoon, S. S. (2008). The impact of corporate governance on earnings management in Korea. Management and Accounting Review (MAR), 7(1), 43-59.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375-400.
Knechel, W. R., & Sharma, D. S. (2012). Auditor-provided non-audit services and audit effectiveness and efficiency: Evidence from pre-and post-SOX audit report lags. Auditing: A Journal of Practice & Theory, 31(4), 85-114.
Mintzberg, H. (1973). The nature of managerial work. New York: Harper & Row.
Mohamad Naimi, M. N., Rohami, S., & Wan-Hussin, W. N. (2010). Corporate governance and audit report lag in Malaysia. Corporate Governance and Audit Report Lag in Malaysia (October 20, 2010). Asian Academy of Management Journal of Accounting and Finance, 6(2), 57-84.
Na, K., & Hong, J. (2017). CEO gender and earnings management. Journal of Applied Business Research (JABR), 33(2), 297-308.
Qawasmeh, S., & Azzam, M. (2020). CEO characteristics and earnings management. Accounting, 6(7), 1403-1410.
Quốc hội (2020). Luật doanh nghiệp (số 59/2020/QH14).
Ran, G., Fang, Q., Luo, S., & Chan, K.C. (2015). Supervisory board characteristics and accounting information quality: Evidence from China. International Review of Economics & Finance, 37, 18-32. https://doi.org/10.1016/j.iref.2014.10.011
Serfling, M. A. (2014). CEO age and the riskiness of corporate policies. Journal of Corporate Finance, 25, 251–273. https://doi.org/10.1016/j.jcorpfin.2013.12.013
Yasser, Q.R., Mamun, A.A., & Hook. M. (2017). The impact of ownership structure on financial reporting quality in the east. International Journal of Organizational Analysis, 25(2), 178-197.
Yim, S. (2013). The Acquisitiveness of Youth: CEO Age and Acquisition Behavior. Journal of Financial Economics, 108(1), 250-273.
Zalata, A.M., & Roberts, C. (2017). Managing earnings using classification shifting: UK evidence. Journal of International Accounting, Auditing and Taxation, 29, 52–65. https://doi.org/10.1016/j.intaccaudtax.2017.04.001
Armstrong, C.S., Jagolinzer, A.D., Larcker, D.F. (2010). Chief Executive Officer Equity Incentives and Accounting Irregularities. Journal of Accounting Research, 48(2), 225-271.
Alves, S. (2021). CEO duality, earnings quality and board independence. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-07-2020-0191.
Alves, S. (2012). Ownership Structure and Earnings Management: Evidence from Portugal. Australasian Accounting, Business and Finance Journal, 6(1), 57-74.
Ball, R., & Foster, G. (1982). Corporate Financial-Reporting-A Methodological Review Of Empirical-Research. Journal of Accounting Research, 20, 161-234.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of Accounting and Economics, 31(1-3), 77-104.
Beck, N., Katz, J. N. (1995). What to do (and not to do) with time-series cross-section data. American Political Science Review, 89(3), 634-647
Beekes, W., Pope, P., Young, S. (2004). The link between earnings timeliness, earnings conservatism and board composition: evidence from the UK. Corporate Governance: An International Review, 12(1), 47-59.
Beest, F. V., Braam, G. J. M., & Boelens, S. (2009). Quality of financial reporting: measuring qualitative characteristics. NICE Working Paper; 09-108. http://www.ru.nl/nice/workingpapers.
Berle, A., & Means, G. (1932). The Modern Corporation and Private Property (Commerce Clearing House, New York). References-Scientific Research Publishing.
Brickley, J. A., Lease, R. C., & Smith, C. (1988). Ownership structure and voting on antitakeover amendments. Journal of Financial Economics, 20(1-2), 267-291.
Byard, D., Li, Y., & Weintrop, J. (2006). Corporate Governance and the Quality of Financial Analyst’s Information. Journal of Accounting and Public Policy, 25(5), 609-625.
Cheng, Q., & Farber, D.B. (2008). Earing statement, changes in CEO compensation, and firm performance. The Accounting Review, 83(5), 1217-1250
Dechow, P.M., Sloan, R.G., Sweeney, A.P. (1996). Causes and Consequences of Earnings Management Manipulation: An Analysis of firm Subject to Enforcement Action by SEC. Contemporary Accounting Research, 13(1), 1-36.
Donalson, L., & Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16(1), 49-64.
Fama, E.F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88(2), 288-307.
Fama, E.F., & Jensen, M.C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Fan, J. P., Wong, J. (2002). Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia. Journal of Accounting and Economics, 33(3), 401-425.
Firth, M., Fung, P. M., & Rui, O. M. (2007). Ownership, two-tier Board Structure, and the Informativeness of Earnings: Evidence from China. Journal of Accounting and Public Policy, 26(4), 463-496.
Gujarati, D. N., & Porter, D. C. (2004). Basic econometrics, 4th edn, the MacGraw Hill. New York.
Harris, O., Karl, J. B., & Lawrence, E. (2019). CEO compensation and earnings management: Does gender really matter?. Journal of Business, 98, 1-14. https://doi.org/10.1016/j.jbusres.2019.01.013.
Huang, H.W., Rose-Green, E., & Lee, C. C. (2012). CEO Age and Financial Reporting Quality. Accounting Horizons, 26(4), 725–740.
Bamahros, H., & Wan-Hussin, W. N. (2016). Types of institutional investors and financial reporting timeliness: Empirical study in Malaysia. In International Conference on Accounting Studies (ICAS).
IASB (2018). The Conceptual Framework. https://www.iasplus.com/en/news/2018/03/cf.
Isidro, H., & Gonçalves, L. (2011). Earnings management and CEO characteristics in Portuguese firms. Corporate Ownership and Control, 1(1), 87-95.
Jensen, M.C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
Kazemian, S., & Sanusi, Z. M. (2015). Earnings management and ownership structure. Procedia Economics and Finance, 31, 618-624. https://doi.org/10.1016/S2212-5671(15)01149-1.
Kim, H. J., & Yoon, S. S. (2008). The impact of corporate governance on earnings management in Korea. Management and Accounting Review (MAR), 7(1), 43-59.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375-400.
Knechel, W. R., & Sharma, D. S. (2012). Auditor-provided non-audit services and audit effectiveness and efficiency: Evidence from pre-and post-SOX audit report lags. Auditing: A Journal of Practice & Theory, 31(4), 85-114.
Mintzberg, H. (1973). The nature of managerial work. New York: Harper & Row.
Mohamad Naimi, M. N., Rohami, S., & Wan-Hussin, W. N. (2010). Corporate governance and audit report lag in Malaysia. Corporate Governance and Audit Report Lag in Malaysia (October 20, 2010). Asian Academy of Management Journal of Accounting and Finance, 6(2), 57-84.
Na, K., & Hong, J. (2017). CEO gender and earnings management. Journal of Applied Business Research (JABR), 33(2), 297-308.
Qawasmeh, S., & Azzam, M. (2020). CEO characteristics and earnings management. Accounting, 6(7), 1403-1410.
Quốc hội (2020). Luật doanh nghiệp (số 59/2020/QH14).
Ran, G., Fang, Q., Luo, S., & Chan, K.C. (2015). Supervisory board characteristics and accounting information quality: Evidence from China. International Review of Economics & Finance, 37, 18-32. https://doi.org/10.1016/j.iref.2014.10.011
Serfling, M. A. (2014). CEO age and the riskiness of corporate policies. Journal of Corporate Finance, 25, 251–273. https://doi.org/10.1016/j.jcorpfin.2013.12.013
Yasser, Q.R., Mamun, A.A., & Hook. M. (2017). The impact of ownership structure on financial reporting quality in the east. International Journal of Organizational Analysis, 25(2), 178-197.
Yim, S. (2013). The Acquisitiveness of Youth: CEO Age and Acquisition Behavior. Journal of Financial Economics, 108(1), 250-273.
Zalata, A.M., & Roberts, C. (2017). Managing earnings using classification shifting: UK evidence. Journal of International Accounting, Auditing and Taxation, 29, 52–65. https://doi.org/10.1016/j.intaccaudtax.2017.04.001
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