TITLE:
CEO/CFO Relevance and Corporate Earnings Management
AUTHORS:
Mengzhen Wu
KEYWORDS:
CEO-CFO Connectedness, Corporate Earnings Management, CEO Duality, Equity Incentive, CEO Overconfidence
JOURNAL NAME:
Modern Economy,
Vol.10 No.3,
March
21,
2019
ABSTRACT: It’s a fact that the CEO-CFO connection will be
tighter if they have appointment relationships, which may lead to the disfunction
of CFOs in regulating and supervising corporate financial activities. In order
to explore the actual influence of CEO-CFO
connections, we studied the correlation between CEO-CFO connectedness
and the degree of corporate earnings management using the China listed company
data from year 2005 to 2014. Results showed that CEO-CFO connections will
increase corporate earnings management after considering the year fixed effect
and the industry fixed effect. We control for corporate operation, CEO
background and corporate governance factors. Further regressions are done using
grouped samples divided by company size and ownership structure. The findings
remain solid even after considering of numbers of robustness tests. Besides, we
find that CEO duality and equity incentive will enhance the positive
relationship.