CEO Characteristics and Real Earnings Management in Jordan

Abstract

The Chief Executive Officer (CEOs) tends to be the most influential member of a corporation as they exert control over corporate decisions such as financial disclosure, board structure, and company performance in ensuring enhanced corporate performance and earnings. The issue of earnings management (EM) that has captured the attention of researchers may be among the most critical factors that are linked to financial statement manipulation. Therefore, the current study explored the effects of the personal characteristics of CEOs on real earnings management (REM) practices in Jordan. Data of 58 companies listed on the Amman Stock Exchange for six years from 2013 to 2018 were utilised to achieve this study’s objectives. The results of this study revealed that CEOs’ experience had a significantly positive association with REM. Meanwhile, CEOs’ tenure had no impact on REM among Jordanian firms. Also, the results exposed the presence of a significantly negative association between CEO duality and REM. Finally, CEOs’ political connection was found to have a significantly positive association with REM. This study offers empirical evidence on the effect of CEO characteristics on REM and how such characteristics can lead to exploitation, which brings an impact on the financial reporting quality.