The Role of CEO Origin in Earnings Management Practices: An Empirical Study of Industrial and Services companies listed on Amman Stock Exchange

Abstract

The primary aim of this research is to investigate the role of chief executive officer (CEO) origin in the earnings management practices of shareholding non-financial companies listed on the Amman Stock Exchange. The study aims to determine the role of earnings management practices of external CEOs in future performances. To achieve its objectives, a panel data approach for the period 2009-2018 was adopted; in addition, the ordinary least square (OLS) method and two-stage least squares (2SLS) technique were utilised, through fixed-effects and random-effects models, to test the hypotheses. Results show a positive relationship between CEO origin and earnings management practices of shareholding non-financial companies listed on the Amman Stock Exchange. The study reveals an inverse relationship between the earnings management practices during the first period of external CEO's service and the future performance of the company. A literature review found that only a few studies have investigated the role of personal CEO characteristics in earnings management practices in the Jordanian context. No study has examined the influence of CEO origin in earnings management practices. In addition, these findings can offer a board of directors insights into how to focus their attention on the role of CEO origin in earnings management practices so as to benefit their companies .