ABSTRACT

This study explores the relationship between overconfident Chief Financial Officers (CFOs) and earnings management. Through the lens of upper echelons and overconfidence theories, and using a large sample of 14,156 observations of US firms from 1999 to 2021 inclusive, our study finds that overconfident CFOs are positively associated with earnings management. We show that overconfident CFOs use earnings management to reduce earnings volatility, given that a smooth performance can release their financing pressure. In doing this, we rule out another possible explanation of overconfident CFOs engaging in earnings management to pursue high compensation. Our findings pass a series of robustness tests, including entropy balancing, the Difference-in-Differences test based on the propensity score matching sample (PSM-DID), and alternative measures of main variables. Our study provides a new determinant of earnings management that has more explanatory power than CFO demographic traits – i.e. CFO cognitive biases. Our findings nonetheless show the “bright” side of CFO overconfidence, helping investors, regulators, and policymakers understand overconfident CFOs’ financial reporting decisions.

摘要

本研究探讨过度自信的首席财务官 (CFO) 与盈余管理之间的关系。通过高层和过度自信理论的视角，并使用 1999 年至 2021 年期间对美国公司进行的 14,156 次观察的大量样本，我们的研究发现过度自信的 CFO 与盈余管理呈正相关。我们表明，过度自信的 CFO 使用盈余管理来降低盈余波动，因为平稳的业绩可以释放他们的融资压力。这样做，我们排除了过度自信的 CFO 从事盈余管理以追求高薪酬的另一种可能解释。我们的研究结果通过了一系列稳健性测试，包括熵平衡、基于倾向得分匹配样本（PSM-DID）的差异检验、和主要变量的替代措施。我们的研究提供了一个新的盈余管理决定因素，它比 CFO 人口统计学特征（即 CFO 认知偏差）更具解释力。尽管如此，我们的研究结果显示了 CFO 过度自信的“光明”一面，帮助投资者、监管机构和政策制定者理解过度自信的 CFO 的财务报告决策。