Yeh, CH. M. Y., and Lin, P. S. 2018. Does CEO Reputation Matter to Financial Reporting Quality?. NTU Management Review, 28 (3): 1-46. https://doi.org/10.6226/NTUMR.201812_28(3).0001
Yaying Mary Chou Yeh, Department of Accounting, Economics and Finance, Framingham State University
Ping-Shin Lin, Accounting and Finance Program, National Dong Hwa University
Abstract
Financial reporting credibility is important because decision-useful information is greatly appreciated by all market participants. From a sample of 303 incumbent CEOs from Taiwanese listed electronics firms during the period from 2006-2008, the present study explores to what extent CEO reputation affects a firm’s earnings quality. The efficient contracting hypothesis predicts reputed CEOs produce higher quality financial reports while the managerial opportunism hypothesis posits the opposite. Empirical findings indicate that the efficient contracting hypothesis dominates in explaining such relationships. Moreover, the positive CEO reputation effects persist in family firms because of their strong incentive to protect the longevity and reputation of the family, supporting the alignment of interest argument. Overall, our results provide additional evidence on variations in CEO reputation-earnings quality relationships using an international setting with distinctive features related to concentrated ownership and the abundance of family firms.
Keywords
CEO reputationearnings qualityfamily firm