This website uses cookies to help us give you the best experience when you visit our website. By continuing to use this website, you consent to our use of these cookies.
Read more
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 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.
Recent research shows that a high wage gap between managers and workers identifies better-performing firms, but the stock market does not seem to price...
We explore a novel survey on responsible investing by institutional investors around the world and match it to archival data on their equity portfolio...
The explosion in ESG research has led to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of Refinitiv...