The Effect of CEO Characteristics on Earnings Management Practices of Private Norwegian SMEs

Abstract

Managerial characteristics in financial decisions have gained more attention during the last decades. Hence, this thesis aims to investigate the effect of CEO characteristics on earnings management practices for private Norwegian small and medium-sized enterprises (SMEs). In particular, this thesis tries to examine a relationship between the CEO characteristics gender, age, tenure, board membership, and ownership on discretionary accruals, measured by the Jones model (1991), the Modified Jones model by Dechow et al. (1995), and the model by Kothari et al. (2005). We are using panel data obtained from the Center of Corporate Governance Research (CCGR) database, which shows Norwegian firms over the time period from 2000 to 2018. By using the three models for calculating discretionary accruals, our results provide evidence that female CEOs, older CEOs, and CEOs with high tenure tend to engage in less earnings management in private Norwegian SMEs. These findings are also proven to be robust for several model specifications. Our findings could be valuable to users of financial information and policymakers who are interested in increasing the reliability of financial reporting.