“Effect of CEO-executive connections on earnings management and detection” by Ms. So Yean KWACK
Ms. So Yean KWACK
Ph.D. Candidate in Accounting
Fox School of Business
While the importance of the top management rather than the CEO has been emphasized in the management and strategy literature, there is limited research on how top management team affects firm decisions in the accounting and finance realm. This study uses connections between the CEO and the top non-CEO executives to examine whether having previously formed relationships affect their earnings management activities and detection. I find that as the number of executives with connections to the CEO increases, so do discretionary accruals. In contrast I do not find any association between connections and real earnings management. I also find that the greater number of executives with connections to the CEO, the less likely accounting manipulation will be detected.