Quality control system criticism raised by the Public Company Accounting Oversight Board in non‐US jurisdictions and earnings quality of non‐cross‐listed clients

Linden, Christophe Van; Mazza, Tatiana

doi:10.1111/ijau.12123

Cited by 5 publications

(5 citation statements)

References 30 publications

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“…The absolute values of the residuals of the Jones, Modified Jones and Modified Jones with ROA models were assumed as the variable that captures the earnings management of companies. The use of the absolute value is consistent with previous research (Garc ıa Lara et al, 2017;Ghosh et al, 2010;Van Linden and Mazza, 2018) and disregards the existence of a positive or negative sign of the measured values.…”

Section: Appendixsupporting

confidence: 84%

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The effect of social ties between the CEO and board of directors and fiscal council's members on earnings management

Ramos

Locatelli

Azevedo

et al. 2022

JAEE

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PurposeSocial factors can shape economic decisions. Corporate governance (CG) studies and guidelines usually neglect that the chief executive officer (CEO) and board members may be socially tied. This study investigates the effects of social ties between the CEO and board members on earnings management (EM).Design/methodology/approachThe authors run a series of regressions using a sample of Brazilian companies listed on the Brazilian Stock Exchange [B]³ between 2011 and 2017 to assess the effect of the social ties between the CEO and board members on EM using a social ties index. The authors also employ five robustness tests to verify the consistency of results, including alternative proxies of EM and social ties and an estimation using fixed effects.FindingsAfter developing and computing a social ties index between the CEOs and members of the board of directors (BD) and the fiscal council (FC), the study’s findings indicate that a significant level of social ties between the CEO and BD has a negative impact on EM. However, for FC members, the authors found non-significant results.Originality/valueUnlike previous studies, the authors built a social tie index (STI) from five elements of social ties assessed in an environment with a two-tier board system. Results show that elements of social interactions and personal relationships can benefit the company, as a CEO's level of social ties with the BD reduces EM practices.

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Section: Appendixsupporting

confidence: 84%

“…The use of the absolute value is consistent with previous research (García Lara et al. , 2017; Ghosh et al ., 2010; Van Linden and Mazza, 2018) and disregards the existence of a positive or negative sign of the measured values.…”

mentioning

confidence: 99%

The effect of social ties between the CEO and board of directors and fiscal council's members on earnings management

Ramos

Locatelli

Azevedo

et al. 2022

JAEE

View full text Add to dashboard Cite

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“…By operationalizing the estimation of accruals as reported, concerns regarding the change in general levels of accruals that result from events in each year are mitigated, given that the intercepts of each estimation/year already capture these effects (Costa et al, 2018). Consistent with previous studies, the absolute values of the residuals of the accruals models were used, disregarding the existence of a positive or negative sign of the measured values (García Lara et al, 2017;Hooghiemstra et al, 2019;Van Linden & Mazza, 2018). The independent variables considered in this study comprised the CEO power(PwCEOit) (H1), the social tie index (ICSCAit) (H2), and the interaction between them (H3).…”

Section: Methodological Proceduresmentioning

confidence: 99%

Earnings Management

Locatelli¹,

Ramos²,

Sprenger³

2021

Rev. Cat. Cien. Cont.

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This study aimed to analyze the influence of powerful CEOs on earnings management (EM) considering the presence of social connections between the CEO and members of the board of directors (CA). The sample consisted of 183 Brazilian companies listed in [B]³ in the period 2011 to 2017, totaling 881 observations. EM was measured by the Jones (1991) and Modified Jones (1995) models and considered the dependent variable, under which the effect of (i) a CEO power metric developed by principal component analysis was analyzed from a multidimensional perspective of power (structural power, ownership power, power of specialization and power of prestige), (ii) an index that measures the level of social connections between the CEO and the Board members based on indicators already reviewed by the literature (educational, professional and family relationships background), and (iii) the interaction between these variables. The results of 6 linear regression estimates (MQO) with cross-section pools and robust errors indicate that powerful CEOs are related to higher levels of discretionary accruals, while social connections mitigate EM. When the interaction between these variables is included, both CEO power and social connections lose their significant effect on EM, indicating that in the presence of social connections, powerful CEOs may fail to engage in EM practices. This result contributes to the discussion about the interference of social factors on economic decisions, drawing attention to the impact of social factors on the quality of profits and the CG of companies.

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“…Ao operacionalizar a estimação dos accruals conforme reportado, mitiga-se as preocupações em relação à alteração nos níveis gerais dos accruals que resultem de eventos ocorridos em cada ano, dado que os interceptos de cada estimação/ano já capturam esses efeitos (Costa et al, 2018). Coerente com estudos anteriores, foram utilizados os valores absolutos dos resíduos dos modelos de accruals, desconsiderando-se a existência de sinal positivo ou negativo dos valores mensurados (García Lara et al, 2017;Hooghiemstra et al, 2019;Van Linden & Mazza, 2018). As variáveis independentes consideradas neste estudo compreenderam o poder do CEO (PwCEOit) (H1), o índice de conexão social (ICSCAit) (H2) e a interação entre ambas (H3).…”

Section: Procedimentos Metodológicosunclassified

Gerenciamento de resultados

Locatelli

Ramos

Sprenger

2021

Rev. Cat. Cien. Cont.

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Este estudo teve como objetivo analisar a influência de CEOs poderosos no gerenciamento de resultados (GR) considerando a presença de conexões sociais entre o CEO e os membros do Conselho de Administração (CA). A amostra foi constituída de 183 empresas brasileiras listadas na [B]3 S.A. no período de 2011 a 2017, totalizando 881 observações. O GR foi mensurado pelo modelo de Jones (1991) e Jones Modificado (1995) e considerada a variável dependente, sob qual foi analisado o efeito de: (i) uma métrica de poder do CEO desenvolvida por análise de componentes principais a partir de uma ótica multidimensional de poder (poder estrutural, poder de propriedade, poder de especialização e poder de prestígio), (ii) um índice que mensura o nível das conexões sociais entre o CEO e os membros do CA a partir de indicadores já revisados pela literatura (background educacional, profissional e relações familiares), e (iii) a interação entre estas variáveis. Os resultados das 6 estimações de regressões lineares (MQO) com pools de cross-section e erros-robustos indicam que CEOs poderosos estão relacionados a maiores níveis de accruals discricionários, enquanto as conexões sociais mitigam o GR. Quando incluída a interação entre essas variáveis, tanto o poder do CEO quanto as conexões sociais perdem o efeito significativo sobre o GR, indicando que na presença das conexões sociais, CEOs poderosos podem deixar de se engajar em práticas de GR. Esse resultado contribui para a discussão sobre a interferência de fatores sociais sobre decisões econômicas chamando atenção para o impacto de fatores socias na qualidade dos lucros e na GC das empresas.

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Quality control system criticism raised by the Public Company Accounting Oversight Board in non‐US jurisdictions and earnings quality of non‐cross‐listed clients

Cited by 5 publications

References 30 publications

The effect of social ties between the CEO and board of directors and fiscal council's members on earnings management

The effect of social ties between the CEO and board of directors and fiscal council's members on earnings management

Earnings Management

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