TY  - UNPD
A1  - Gibson, Rajna
A1  - Sohn, Matthias
A1  - Tanner, Carmen
A1  - Wagner, Alexander F.
T1  - Earnings management and managerial honesty: the investors’ perspectives
T2  - European Corporate Governance Institute: ECGI Working Paper Series in Finance ;  No. 516/2017, Swiss Finance Institute Research Paper ; No. 17-03, LawFin working paper ; No. 7
N2  - Extant research shows that CEO characteristics affect earnings management. This paper studies how investors infer a specific characteristic of CEOs, namely moral commitment to honesty, from earnings management and how this perception – in conjunction with their own social and moral preferences – shapes their investment choices. We conduct two laboratory experiments simulating investment choices. Our results show that participants perceive a CEO to be more committed to honesty when they infer that the CEO engaged less in earnings management. For investment decisions, a one standard deviation increase in a CEO's perceived commitment to honesty compared to another CEO reduces the relevance of differences in the CEOs’ claimed future returns by 40%. This effect is most prominent among investors with a proself value orientation. To prosocial investors, their own honesty values and those attributed to the CEO matter directly, while returns play a secondary role. Overall, perceived CEO honesty matters to different investors for distinct reasons.
T3  - LawFin Working Paper - 7 
KW  - earnings management
KW  - honesty
KW  - investor preferences
KW  - investor segmentation
KW  - protected values
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/61647
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-616471
IS  - February 10, 2021
EP  - SA-33
PB  - Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
CY  - Frankfurt am Main
ER  -