CEO Career Horizon, CEO Power, Corporate Governance and Earnings Quality: Evidence from Egypt

Abstract

This study analysed the determinants of firms' reported earnings quality (hereafter FREQ) for Egyptian firms from 2008 to 2019, using panel data. The Chief Executive Officer (CEO) career horizon (a CEO approaching retirement) is negatively associated with FREQ; CEO power dynamics (CEO duality, CEO stock ownership, CEO tenure, and CEO political connections) negatively affect FREQ; and board independence significantly moderates (weakens) the negative impact of CEO ownership and CEO tenure on FREQ. The findings do not support the weakening or substitution role of board independence for the negative impact of CEO career horizon, CEO duality and CEO political connections on FREQ. The presence of gender-critical mass serves as a substitution mechanism for the negative impact of CEO career horizon and CEO power dynamics (duality, ownership, tenure, and political connections) on FREQ. The findings on the interplay among CEO power dynamics shows that CEO duality, CEO ownership and CEO tenure augment each other in their negative role in determining FREQ. CEO educational level substitutes the negative impacts of CEO ownership and CEO tenure on FREQ. Principal analysis was observed for robustness through propensity matching score and difference-in-difference (DID) techniques. This study adds new knowledge by exploring the negative consequences of CEO career horizon and CEO power dynamics, and provides insights into the constraining role of corporate governance, strengthens reverse-causality, and uses DID approach and propensity matching techniques.