Top Management Team Characteristics and Accrual-Based Earnings Management

Yu-Ting Hsieh, Tsung Kang Chen, Yi Jie Tseng, Ruey Ching Lin

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This study examines how top management team (TMT) knowledge and average tenure affect accrual-based earnings management by investigating 4791 Taiwanese listed companies from 2006 to 2010. TMT members with more knowledge (higher education level, more accounting expertise, and greater prior top management experience) and longer average tenure have better performances and higher reputations, and are more aware of the litigation costs of earnings manipulations; therefore, they reduce managers’ incentives to manage earnings (incentive-reduction effect). On the other hand, these TMT members are also likely to become entrenched and engage in more earnings manipulations (entrenchment-enhancing effect). The empirical results show that firms’ TMT knowledge and average tenure are negatively associated with discretionary accruals, suggesting that the incentive-reduction effect is stronger than the entrenchment-enhancing effect, which makes TMT members less likely to engage in earnings management. Moreover, the above results are robust when employing different earnings management measures and suspect firm analyses, as well as considering endogeneity issues. Finally, the study suggests that the presence of a founding family may reduce the influences of TMT knowledge and average tenure on earnings management.

Original languageEnglish
Pages (from-to)314-334
Number of pages21
JournalInternational Journal of Accounting
Volume53
Issue number4
DOIs
Publication statusPublished - 2018 Dec 1

Fingerprint

Top management teams
Earnings management
Tenure
Incentives
Earnings manipulation
Entrenchment
Litigation costs
Discretionary accruals
Expertise
Top management
Endogeneity
Empirical results
Listed companies
Managers

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance

Cite this

Hsieh, Yu-Ting ; Chen, Tsung Kang ; Tseng, Yi Jie ; Lin, Ruey Ching. / Top Management Team Characteristics and Accrual-Based Earnings Management. In: International Journal of Accounting. 2018 ; Vol. 53, No. 4. pp. 314-334.
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Top Management Team Characteristics and Accrual-Based Earnings Management. / Hsieh, Yu-Ting; Chen, Tsung Kang; Tseng, Yi Jie; Lin, Ruey Ching.

In: International Journal of Accounting, Vol. 53, No. 4, 01.12.2018, p. 314-334.

Research output: Contribution to journalArticle

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