Managers: Their Effects on Accruals and Firm Policies

Abstract

This paper investigates whether top executives have significant individual‐specific effects on accruals that cannot be explained by firm characteristics. Exploiting individual executive and firm data from a period of 37 years, we find that individual executives play a significant role in determining firms’ accruals. We examine whether executives’ effects on accruals are related to their personal styles on firm policies, investment, financing and operating decisions. Our results show that individual executives’ effects on accruals are more correlated with their operating decisions than investment and financing decisions. We next investigate whether managers themselves also have a personal style for directly affecting accruals. We compare effects exerted by CEOs to CFOs. We find CEOs are more likely to affect accruals through firm policy decisions and CFOs are more likely to affect accruals through accounting decisions. CFOs tend to report more ‘solid’ earnings than CEOs, i.e., CFOs are more likely to push accruals to zero.

Do talented managers invest more efficiently? The moderating role of corporate governance mechanisms

“…It proposes that managers accumulate knowledge through formal education in a particular field and through "learning by doing" and that they rely on this experience when making decisions. Assuming that managers can develop unique styles that influence financial decisions, several papers isolate the idiosyncratic managerial contribution and test its effect on innovation (Holbrook, Cohen, Hounshell, & Klepper, 2000), accounting restatements (Aier, Comprix, Gunlock, & Lee, 2005), insolvency (Leverty & Grace, 2012), discretionary accruals (Dejong & Ling, 2013), bank performance (Andreou, Ehrlich, & Louca, 2013), or credit risk assessments (Bonsall, Holzman, & Miller, 2015).…”

Exceptional big linkers: Dutch evidence from the 20th century

“…The method is by now well established and our estimations follow the approach in these studies. Fixed effects models have been used in management studies (Bertrand & Schoar, 2003), accounting (Bamber, Jiang, & Wang, 2010;DeJong & Ling, 2013;Ge, Matsumoto, & Zhang, 2011;Richardson, Tuna, & Wysocki, 2003) and corporate governance (e.g. Bouwman, 2011;Cronqvist & Fahlenbrach, 2008;Graham, Li, & Qiu, 2011).…”

Styles of regulators : evidence from the sec comment letters

“…Prior studies demonstrate that managers have individual styles and such styles have substantial impact on firms' investment and financing decisions, disclosures, financial reporting policies, and tax avoidance behaviour (Bamber et al, 2010;Dejong & Ling, 2013;Dyreng et al, 2010;Ge et al, 2011;Yang, 2012). In the SEC filing review setting, the goal is to identify circumstances where improvement can be made in the filings' expositional clarity and compliance with SEC rules and accounting standards.…”

“…I am interested in whether the SEC staff members exhibit their individual differences in their enforcement actions. My study is motivated by recent studies in economics, finance and accounting which stress individual differences in decision making (Bamber, Jiang, & Wang, 2010;Bertrand & Schoar, 2003;Dejong & Ling, 2013;Dyreng, Hanlon, & Maydew, 1 For example, the U.K. publishes the Code for Crown Prosecutors, Canada publishes The Federal Prosecution Service Deskbook, Hong Kong publishes Prosecution Code, and Australia publishes Prosecution Policy of the Commonwealth (Australia's Federal Prosecution Service, 2016;Depart of Justice, 2015;Director of Public Prosecution, 2013;Public Prosecution Service of Canada, 2014). These examples show that different governments across the world care about consistency when officials carry out law enforcements, and, hence, publish public codes of conduct for prosecutors to ensure that they apply the laws consistently and do not abuse their discretion.…”

“…This fixed-effects-based research design was introduced by Bertrand and Schoar (2003) and used in a variety of settings (Bamber et al, 2010;Dejong & Ling, 2013;Ge et al, 2011;Yang, 2012). I extract the coefficient estimates of the SEC staff fixed effects and use the distribution of the estimates to explore the economic significance of SEC staff fixed effects.…”