The effect of CEO inside debt holdings on financial reporting quality

The effect of CEO inside debt holdings on financial reporting quality This study investigates the effect of CEO inside debt holdings on financial reporting quality. I find that higher CEO inside debt holdings are associated with lower abnormal accruals, higher accruals quality, a lower likelihood of an earnings misstatement, and a lower incidence of earnings benchmark beating, suggesting that CEO inside debt promotes high financial reporting quality. Additional analyses reveal that (1) CEO inside debt holdings reduce firm-specific stock price crash risk, and that (2) auditors are less likely to report a material internal control weakness for firms that have large CEO inside debt. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

The effect of CEO inside debt holdings on financial reporting quality

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Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-014-9305-8
Publisher site
See Article on Publisher Site

Abstract

This study investigates the effect of CEO inside debt holdings on financial reporting quality. I find that higher CEO inside debt holdings are associated with lower abnormal accruals, higher accruals quality, a lower likelihood of an earnings misstatement, and a lower incidence of earnings benchmark beating, suggesting that CEO inside debt promotes high financial reporting quality. Additional analyses reveal that (1) CEO inside debt holdings reduce firm-specific stock price crash risk, and that (2) auditors are less likely to report a material internal control weakness for firms that have large CEO inside debt.

Journal

Review of Accounting StudiesSpringer Journals

Published: Aug 31, 2014

References

  • CEO stock option awards and timing of corporate voluntary disclosure
    Aboody, D; Kasznik, R
  • The relation between equity incentives and misreporting: The role of risk-taking incentives
    Armstrong, CS; Larcker, DF; Ormazabal, G; Taylor, DJ
  • The effect of SOX internal control deficiencies on firm risk and cost of equity
    Ashbaugh-Skaife, H; Collins, DW; Kinney, WR; Lafond, R
  • Hometown advantage: The effects of monitoring institution location on financial reporting discretion
    Ayers, BC; Ramalingegowda, S; Yeung, PE
  • Employee treatment and firm leverage: a test of stakeholder theory of capital structure
    Bae, K; Kang, J; Wang, J
  • Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism
    Ball, R; Robin, A; Sadka, G
  • Earnings quality in UK private firms: comparative loss recognition timeliness
    Ball, R; Shivakumar, L
  • The role of accruals in asymmetrically timely gain and loss recognition
    Ball, R; Shivakumar, L
  • Earnings quality at initial public offerings
    Ball, R; Shivakumar, L
  • CEO incentives and earnings management
    Bergstresser, D; Philippon, T
  • How does financial reporting quality relate to investment efficiency?
    Biddle, GC; Hilary, G; Verdi, RS
  • Market transparency and the accounting regime
    Bleck, A; Liu, X

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