Abstract
Este estudio examina si la experiencia del director general (CEO) y los conocimientos financieros afectan a las reformulaciones financieras (FR), y cómo lo hacen, investigando una muestra de empresas iraníes que cotizan en bolsa entre 2008 y 2017. Definimos a los consejeros delegados con experiencia como aquellos que son contratados desde dentro de la empresa y a los consejeros delegados expertos en finanzas como aquellos que poseen una cualificación contable o tienen experiencia laboral como auditor, director financiero (CFO), controlador u otros puestos relacionados con la contabilidad. Encontramos que FR está positivamente asociado a los CEOs con información privilegiada (CEOs con más experiencia interna), y negativamente asociado a la experiencia financiera del CEO. Además, encontramos que la experiencia del CEO se asocia negativamente con FR cuando el CEO es un experto financiero. Este resultado pone de manifiesto la importancia de la experiencia financiera de los altos ejecutivos. Además, nuestros resultados muestran que los directores generales con información privilegiada pueden mejorar la calidad de la información financiera reduciendo FR cuando tienen mayor poder de decisión. Este estudio contribuye a la literatura sobre las características de los directores generales y la información financiera. Los resultados ofrecen importantes implicaciones para los responsables políticos y los consejos de administración de las economías emergentes en lo que respecta a la exigencia de nombrar a altos directivos con conocimientos financieros. This study examines whether and how Chief Executive Officer (CEO) experience and financial expertise affect financial restatements (FR) by investigating a sample of Iranian listed companies from 2008 to 2017. We define experienced CEOs as those who are hired from inside the firm and financial expert CEOs as those who hold an accounting qualification or have work experience as an auditor, chief financial officer (CFO), controller, and or other accounting-related positions. We find that FR is positively associated with insider CEOs (CEOs with more internal experience), and negatively associated with CEO financial expertise. Moreover, we find that CEO experience is negatively associated with FR when the CEO is a financial expert. This result highlights the importance of financial background for senior executives. Further, our results show that insider CEOs can improve the financial reporting quality through reducing FR when they have higher decision-making power. This study contributes to the literature on CEO characteristics and financial reporting. The results provide important implications for policymakers and the board of directors in emerging economies regarding the requirement to appoint top managers with financial expertise.
Highlights
Prior research suggests that financial restatement (FR) could be a sign of weakness in the accounting and financial reporting system, ineffectiveness of the internal controls, or a result of management efforts to manipulate the earnings through accounting methods (Akhigbe, Kudla & Madura, 2005; Agrawal & Chandha, 2005; Plumlee & Yohn, 2010)
Prior research examines the relationship between Chief Executive Officer (CEO) characteristics, such as CEO overconfidence (Presley & Abbott, 2013) and CEO age (Huang et al, 2012), and FR, whereas this study is the first to provide evidence regarding the effect of CEO experience and financial expertise on the incidence of FR in an emerging market
Our results provide insights into (1) hiring financial expert CEOs that could build up the trust of accounting information users, in the emerging markets; and (2) the decision of whether to replace a CEO by an insider or outsider in light of firm performance measures and the contribution to the financial reporting quality of the firm
Summary
Restatement signifies that previously published financial statements are not correct or reliable (Wilson, 2008). Prior research examines the relationship between CEO characteristics, such as CEO overconfidence (Presley & Abbott, 2013) and CEO age (Huang et al, 2012), and FR, whereas this study is the first to provide evidence regarding the effect of CEO experience and financial expertise on the incidence of FR in an emerging market. This study provides policy and practical implications by suggesting that regulators, standard-setters, and the board of directors in emerging economies pay attention to the importance of financial expertise in establishing corporate governance measures and financial standards for appointing CEOs. Our results provide insights into (1) hiring financial expert CEOs that could build up the trust of accounting information users, in the emerging markets; and (2) the decision of whether to replace a CEO by an insider or outsider in light of firm performance measures and the contribution to the financial reporting quality of the firm. The final section summarizes the concluding remarks and discusses possible implications
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