The Impact of CEO Сharacteristics on Company's Earnings Quality

Student: Markina Valeriia

Educational Programme: Strategic Corporate Finance (Master)

Year of Graduation: 2020

The problem of efficient companies’ earnings quality is of great and potential interest to researchers nowadays. There is significant influence of both CEO indicators and earnings quality on the company's financial activities, so in this thesis we determine the presence and strength of the impact of CEO characteristics on the quality of financial reporting. A distinctive feature and novelty of this paper is the analysis of results for different markets (developed and emerging) and countries, using different approaches for measuring earnings quality, building aggregate indictors of them and inclusion a series of CEO characteristics that have not previously been researched by scientists. The main CEO characteristics that were included in the analysis are gender, age, tenure, CEO is a founder of the company or not, CEO’s work as chairman of the board of directors or not, salary and compensation, whether CEO is a financial director of the company, whether CEO was appointed to the CEO position inside or outside, the quality of CEO shares in the capital structure and so on. We found industry differences. The greatest interest in the analysis of CEO personality is observed in the sectors of health care, industrials, materials and utilities. The influence of the CEO characteristics on the earnings quality of financial results by country is noted for companies in America and Europe. However, the hypothesis regarding differences in developed and emerging markets (testing data from Asian markets) has not been confirmed. The results of this paper indicate that managerial personality have a very important impact on the company's earnings quality and future development. Significant characteristics of the CEO (gender, age, work of the executive director as the chairman of the board of directors, seniority in the company, awards) are key for personality analysis, because they reflect his or her work experience, hardworking and enthusiasm, and amazing professional abilities.

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