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Davis, JG and Garcıa-Cestona, M (2021)

CEO age, financial statement irregularities, and earnings management

Unpublished manuscript.

ISSN/ISBN: Not available at this time. DOI: Not available at this time.

Abstract: According to upper echelons theory, the characteristics of top management influence firm outcomes signicantly. Drawing on this theory, we study how the occurrence of financial statement irregularities and earnings management are a ected by CEO age. We measure financial statement irregularities by applying Benford’s law to financial statement line items. We also measure accruals-based and real activities earnings management. We find that financial statement irregularities and abnormal decreases in discretionary expenses are more prevalent when CEOs are older. We address endogeneity and use an instrumental variable to demonstrate evidence of a causal link. These ndings hold for the modern, post Sarbanes–Oxley Act period. We also find some evidence of a relation between abnormally high discretionary accruals and older CEOs. The effects of CEO age are especially interesting because average CEO age in the United States has been increasing considerably in recent years. Our unique sample, methodology, and findings provide new insights into the relation between CEO age and financial reporting outcomes which have important policy implications.

@misc{, author = {Justin G. Davis and Miguel Garcıa-Cestona}, title = {CEO age, financial statement irregularities, and earnings management}, year = {2021}, url = {}, }

Reference Type: Other

Subject Area(s): Accounting