Managerial overconfidence, earnings management and the moderating role of business ethics: evidence from the Stoxx Europe 600

Achref Marzouki, Anis Ben Amar
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Abstract

Purpose

This paper aims to explore the relationship between CEO overconfidence and earnings management examined by the discretionary accruals and if this relationship is moderated by business ethics.

Design/methodology/approach

Data from a sample of 246 European firms selected from the Stoxx Europe 600 Index between 2010 and 2022 were used to test the model using panel data and multiple regressions. This paper considered the feasible generalized least squares (FGLS) estimation for linear panel data models. A multiple regression model is used to analyze the moderating effect of business ethics on the association between CEO overconfidence and earnings management. For robustness analyses, this paper included the alternative measure of the dependent variable and independent variable.

Findings

Using discretionary accruals as a proxy for earnings management, the empirical results show a positive relationship between CEO overconfidence and earnings management. Furthermore, the results suggest that business ethics negatively moderates the relationship between CEO overconfidence and earnings management.

Practical implications

This paper makes a significant contribution to stakeholders such as investors, financial decision-makers and auditors. It underscores the importance of integrating ethical considerations into corporate governance practices for fostering accountability and transparency. In addition, it highlights the moderating role of business ethics in transforming the positive effect of CEO overconfidence on earnings management into a negative impact. This emphasizes the pivotal role of ethical norms in financial decision-making processes and extends implications to standard setters and policymakers in the regulatory domain.

Originality/value

To the best of the authors’ knowledge, this is the first study to examine the moderating role of business ethics on the relationship between CEO overconfidence and earnings management in the European context. It is also the first study to document that business ethics can reduce the effect of CEOs’ biased behavior and their scope for discretion, thereby reducing the amount of earnings management. This study fills a research gap by extending the existing literature, which generally focuses on the impact of CEO overconfidence and earnings management.

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管理者过度自信、收益管理和商业道德的调节作用:来自 Stoxx Europe 600 指数的证据
本文旨在探讨首席执行官过度自信与收益管理之间的关系(通过全权应计制进行检验),以及这种关系是否会受到商业道德的调节。设计/方法/方法本文从 2010 年至 2022 年期间的 Stoxx 欧洲 600 指数中选取了 246 家欧洲公司作为样本,使用面板数据和多重回归对模型进行检验。本文考虑了线性面板数据模型的可行广义最小二乘法(FGLS)估计。多元回归模型用于分析商业道德对 CEO 过度自信与收益管理之间关联的调节作用。为了进行稳健性分析,本文纳入了因变量和自变量的替代测量方法。研究结果以全权应计制作为收益管理的替代变量,实证结果显示 CEO 过度自信与收益管理之间存在正相关关系。此外,研究结果表明,商业道德对 CEO 过度自信与收益管理之间的关系具有负向调节作用。它强调了将道德因素纳入公司治理实践以促进问责制和透明度的重要性。此外,它还强调了商业道德在将首席执行官过度自信对收益管理的积极影响转化为消极影响方面所起的调节作用。这强调了道德规范在财务决策过程中的关键作用,并对监管领域的标准制定者和政策制定者产生了深远影响。这也是第一项研究证明商业道德可以减少首席执行官的偏颇行为及其自由裁量权的影响,从而减少收益管理的数量。现有文献普遍关注首席执行官过度自信和收益管理的影响,本研究通过扩展现有文献填补了这一研究空白。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
4.40
自引率
11.10%
发文量
67
期刊介绍: The International Journal of Ethics and Systems (formerly named Humanomics, the International Journal of Systems and Ethics) is a multidisciplinary journal publishing peer review research on issues of ethics and morality affecting socio-scientific systems in epistemological perspectives. The journal covers diverse areas of a socio-scientific nature. The focus is on disseminating the theory and practice of morality and ethics as a system-oriented study defined by inter-causality between critical variables of given problems.
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