CEO personality traits as moderators in the relationship between analyst recommendations and earnings management: evidence from Chinese Listed Firms from a behavioral agency perspective
Keywords:
CEO Personality Traits, Analyst Recommendations, Earnings Management, Behavioral Agency Model, Chinese Listed FirmsAbstract
This study investigates how CEO personality traits moderate the relationship between analyst recommendations and income-increasing earnings management in Chinese listed firms. Integrating behavioral agency theory with the Big Five personality framework, we argue that CEOs' subjective interpretations of analyst recommendations vary systematically according to their personality profiles, resulting in heterogeneous effects on earnings management. Using a novel natural language processing (NLP) approach to measure CEO personality from earnings call transcripts and panel regression models with firm and year fixed effects, we analyze data from CSI300 and CSI500 index constituents between 2000 and 2022. Our results demonstrate that positive analyst recommendations significantly increase earnings management (β = 0.148, p < 0.001). This effect is moderated by CEO personality traits as follows: (H2) CEO extraversion weakens the relationship (p < 0.05); (H3) CEO emotional stability weakens the relationship (p < 0.05); (H4) CEO agreeableness strengthens the relationship (p < 0.01); (H5) CEO conscientiousness most strongly strengthens the relationship (p < 0.01); and (H6) CEO openness strengthens the relationship (p < 0.05). These findings contribute to corporate governance literature by: (1) establishing CEO personality as a crucial boundary condition for analyst monitoring effectiveness, (2) extending behavioral agency theory through integration with personality psychology, and (3) providing practical insights for boards regarding CEO selection and governance design.
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