The Impact of CEO Narcissism on Earnings Management

Capalbo, Francesoco; Frino, Alessandro; Lim, Ming Ying; Mollica, Vito; Palumbo, Riccardo

doi:10.1111/abac.12116

Cited by 120 publications

(157 citation statements)

References 70 publications

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“…The authors find that Raju's word choices changed noticeably in his five annual-report letters prior to the collapse of his firm, as the scale of his financial misstatements increased. Capalbo et al (2017) find that narcissistic CEOs, that is, CEOs who overly use first person singular pronouns in the question-and-answer session of conference calls, are more likely to engage in opportunistic earnings management.…”

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confidence: 86%

“…Capalbo et al. () find that narcissistic CEOs, that is, CEOs who overly use first person singular pronouns in the question‐and‐answer session of conference calls, are more likely to engage in opportunistic earnings management.…”

Section: Introductionmentioning

confidence: 99%

“…Larcker and Zakolyukina (2012) document that models based on linguistic features appeared in CEO and CFO narratives during earnings conference calls are as informative as accounting-based models in detecting financial statement misrepresentation. 1 Other studies focus on CEOs speech to measure verbal and nonverbal vocal cues in detecting financial misreporting (e.g., Capalbo, Frino, Lim, Mollica, & Palumbo 2017;Craig, Mortensen, & Iyer 2013). For example, Craig et al (2013) examine the linguistic features of letters signed by Satyam's chairman Ramalinga Raju, who was involved in the biggest corporate scandal in India.…”

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confidence: 99%

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We examine the effect of annual report textual complexity on firms’ stock liquidity. Using techniques from computational linguistics, we predict and find that less readable filings are associated with lower stock liquidity. Our study provides evidence that difficult‐to‐read annual reports hinder investors’ ability to process and analyze information contained in corporate annual reports, reducing thereby their willingness to trade which decreases stock liquidity. Our findings are robust to a battery of sensitivity tests, including endogeneity, use of alternative estimation techniques, and use of alternative liquidity and readability proxies.

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confidence: 86%

Section: Introductionmentioning

confidence: 99%

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confidence: 99%

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2019

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“…As robustness tests, Capalbo et al . () also estimate the basic Jones () model and the modified Jones model (Dechow et al ., ). Capalbo et al .…”

Section: Suggestions For Improving the Research Design Of Discretionamentioning

confidence: 99%

“…Finally, we use the setting of Capalbo et al . () to illustrate our suggestions for strengthening the research design of studies on earnings management.…”

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confidence: 99%

Research Design Issues in Studies Using Discretionary Accruals

McNichols

Stubben

2018

Abacus

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Because discretionary accruals are known to be noisy proxies of earnings management that often produce biased results, we argue that a correlation between discretionary accruals and a hypothesized factor is generally not an adequate basis for valid inferences about earnings management. In this commentary, we propose and discuss a set of suggestions for improving the research design of studies on earnings management that use discretionary accruals. Specifically, we discuss suggestions for developing predictions about earnings management, choosing among discretionary accrual proxies, estimating discretionary accruals, addressing potential bias in the estimates, and critically evaluating the results obtained.

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The impact of chief executive officer narcissism on environmental, social, and governance reporting

2023

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We analyze the effect of chief executive officer (CEO) narcissism on environmental, social, and governance (ESG) reporting. The study relies partly on hand‐collected, visual data and covers 57 German DAX 40 and MDAX companies from 2016 to 2020 (266 company‐year observations, Bloomberg database). Looking into the sub‐scores of ESG, CEO narcissism has a negative and linear relationship with environment and governance reporting but there is no significant relationship between narcissism and social reporting. Regression analyses further suggest a U‐shaped (quadratic) relation between CEO narcissism and ESG reporting: while low to moderate degrees of narcissism affect overall ESG reporting negatively, as CEO levels of narcissism increase so does the level of reporting. Moreover, further analysis has shown that the quantity of reporting is additionally positively related to ESG performance. The study applies and validates a relatively new but easily applicable measure of narcissism and extends narcissism research in the area of curvilinear relationships. We offer several further implications for human resource managers, regulators, auditors, and (non‐)financial analysts.

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The Impact of CEO Narcissism on Earnings Management

Cited by 120 publications

References 70 publications

Annual report readability and stock liquidity

Annual report readability and stock liquidity

Research Design Issues in Studies Using Discretionary Accruals

The impact of chief executive officer narcissism on environmental, social, and governance reporting

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