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Do powerful CEOs matter for earnings quality? Evidence from Bangladesh

This study investigates the effects of powerful Chief Executive Officers (CEOs) on earnings quality in a setting where CEOs have strong dominance over other top executives and occasionally attempt to exert their influence over corporate regulatory bodies. Using 10-year longitudinal data for the peri...

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Main Authors: Arif, H. M., Mustapha, Mohd Zulkhairi, Jalil, Azlina Abdul
Format: Article
Published: Public Library of Science 2023
Subjects:
Q Science (General)
Online Access:http://eprints.um.edu.my/38782/
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spelling my.um.eprints.387822023-11-28T00:00:40Z http://eprints.um.edu.my/38782/ Do powerful CEOs matter for earnings quality? Evidence from Bangladesh Arif, H. M. Mustapha, Mohd Zulkhairi Jalil, Azlina Abdul Q Science (General) This study investigates the effects of powerful Chief Executive Officers (CEOs) on earnings quality in a setting where CEOs have strong dominance over other top executives and occasionally attempt to exert their influence over corporate regulatory bodies. Using 10-year longitudinal data for the period from 2010 to 2019 and 1,395 firm-year observations from listed non-financial firms in Bangladesh, we found that CEOs' political power and CEOs with high structural and expert power have a significant detrimental effect on earnings quality. Ownership and prestige power have an insignificant impact on earnings quality. These powerful CEOs use accrual and real activity manipulation techniques together to manage the earnings. This study uses the system-generalized method of moment estimates for estimation purposes, and the results remain robust when alternative earnings quality proxies are used. Taken together, our results suggest that CEOs' political duality (i.e., serving simultaneously as a member of parliament and a CEO) should be restricted and that a CEO's tenure should be limited to a reasonable period. This research adds to the existing body of knowledge by offering empirical support for CEO power dynamics on earnings quality, specifically political and prestige power. Public Library of Science 2023-01 Article PeerReviewed Arif, H. M. and Mustapha, Mohd Zulkhairi and Jalil, Azlina Abdul (2023) Do powerful CEOs matter for earnings quality? Evidence from Bangladesh. PLoS ONE, 18 (1). ISSN 1932-6203, DOI https://doi.org/10.1371/journal.pone.0276935 <https://doi.org/10.1371/journal.pone.0276935>. 10.1371/journal.pone.0276935
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic Q Science (General)
spellingShingle Q Science (General)
Arif, H. M.
Mustapha, Mohd Zulkhairi
Jalil, Azlina Abdul
Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
description This study investigates the effects of powerful Chief Executive Officers (CEOs) on earnings quality in a setting where CEOs have strong dominance over other top executives and occasionally attempt to exert their influence over corporate regulatory bodies. Using 10-year longitudinal data for the period from 2010 to 2019 and 1,395 firm-year observations from listed non-financial firms in Bangladesh, we found that CEOs' political power and CEOs with high structural and expert power have a significant detrimental effect on earnings quality. Ownership and prestige power have an insignificant impact on earnings quality. These powerful CEOs use accrual and real activity manipulation techniques together to manage the earnings. This study uses the system-generalized method of moment estimates for estimation purposes, and the results remain robust when alternative earnings quality proxies are used. Taken together, our results suggest that CEOs' political duality (i.e., serving simultaneously as a member of parliament and a CEO) should be restricted and that a CEO's tenure should be limited to a reasonable period. This research adds to the existing body of knowledge by offering empirical support for CEO power dynamics on earnings quality, specifically political and prestige power.
format Article
author Arif, H. M.
Mustapha, Mohd Zulkhairi
Jalil, Azlina Abdul
author_facet Arif, H. M.
Mustapha, Mohd Zulkhairi
Jalil, Azlina Abdul
author_sort Arif, H. M.
title Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
title_short Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
title_full Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
title_fullStr Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
title_full_unstemmed Do powerful CEOs matter for earnings quality? Evidence from Bangladesh
title_sort do powerful ceos matter for earnings quality? evidence from bangladesh
publisher Public Library of Science
publishDate 2023
url http://eprints.um.edu.my/38782/
_version_ 1783876673514504192
score 13.211869

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