CEO Narcissism,Different State Ownership And Earnings Management

Since the foundation of capital markets,the problem of the financial data of listed companies has been continues and increasingly serious.Because earnings management has deviated from the normal production and operation of enterprise decision-making,so it will against the interests of the creditors,will distort information disclosed to investors,and will affect the future period earnings and cash flow which will be harmful to the long-term development of the company.So the research on earnings management motivation and decision factors is necessary.Existing research theory of corporate behavior finance shows that managers’operating decisions are frequently influenced by their own personality characteristics.Personality characteristics are the internal cause of behavior,and have a significant influence on behavior process.The nature of earnings management is economic behavior under the combination of people’s personality characteristics and external characteristics.Research shows that narcissism is the most common personality characteristic of the leaders.CEOs,like other individuals,are fallible human beings who may exhibit more or less narcissism.They have influential and powerful positions which may give them an inflated sense of self-esteem.CEOs are treated as special persons because they hold the highest position within the organization.A response of self-overvaluation is likely to occur.Foreign scholars have shown that a high degree of narcissism has a positive impact on unethical behavior,so if CEO fails to achieve the goal,he may engage in unethical or even illegal behaviors.Therefore,it is of great significance to study the influence of CEO narcissistic personality characteristics on the economic consequences of enterprises.This article focuses on the relationship of CEOs’ narcissistic character and earnings management in different state ownership.Narcissists seek affirmation for their inflated sense of self-importance.Published profit results such as EPS,which are publicly reported quarterly and annually,forecasted and followed by analysts,and covered by the media,are a possible means for narcissistic CEOs to satisfy their need for affirmation and adulation.Narcissistic people set goals that are impossible to achieve because they need constant self-approval and respect,when the goal can’t be reached,they may use unethical behavior for good and for fame.Over time,a narcissist’s inflated sense of self-worth translates into overconfidence of their own abilities,and their inherent charisma,perceived or otherwise,enables them to manipulate and influence the perception of others.Narcissistic CEOs tend to overestimate them own,and set higher goals.Since narcissistic leaders can easily manipulate and influence others,they are easier to manipulate the company’s external reporting through inflated profits,and get reward,praise and respect from others.So the narcissistic personality characteristic in CEO tends to increase the company’s tendency to participate in earnings management.Due to the different nature of enterprises,state-owned enterprises and non-state-owned enterprise leaders focus differently on corporate performance and corporate interests.In state-owned enterprises,because CEOs’ decision-making power,the selection mechanism and supervision are different from non-state-owned enterprises,the sensitivity between leaders of narcissism and earnings management behavior will be inhibited.Identify CEOs’ narcissistic character,and thereby strengthen internal control,to help the long-term development of the company and to reduce the losses of investors and creditors.The research methods used in this paper include normative analysis and empirical test.The main contents include the following six parts.The first part presents the research background and research motivation.The second part summarizes the predecessors’ research and reviews the previous research literature.The third part,deduces the theoretical basis of this writing,and put forward the two hypotheses of this study.The fourth part is to set research variables and design econometric models.The fifth part tests the two hypotheses through the empirical analysis of the results.The sixth part summarizes the conclusions,and put forward corresponding policy recommendations on the basis of research.This paper selects the data of a list of corporation in Shanghai and Shenzhen stock markets during 2005-2016 as the research sample,do the theory analysis and empirical research on the relationships between narcissistic personality characteristics in CEOs,state ownership and earnings management.The theoretical analysis mainly consists of the methods of induction and deduction,in order to obtain specific logic of the governance mechanism.The empirical analysis mainly consists of OLS regression and robustness test,which deeply verify the two hypotheses and finally draw reliable conclusions.It is found that narcissistic CEOs are easier to make optimistic earnings forecasts,when the actual earnings did not reach the predicted earnings,they may engage in earnings management for personal image and public appreciation.The higher degree of CEO’s narcissism,the stronger motivation of earnings management the CEO will have,and the higher earnings management the CEO may engage in.We examine the mechanism driving the observed results and find that narcissistic CEOs are more likely to manipulate earnings information through real and operational activities rather than accrual-based manipulations,because of the strengthening of market supervision.Further,this paper studies the impact of China’s specific social and cultural economic system.The results of the study show that the sensitivity between CEO narcissism and earnings management behavior is lower in state-owned enterprises.The main contribution of this paper lies in deeply excavating the motivation of earnings management on personality characteristics.This paper combines the leaders’ narcissistic characteristics with earnings management.And test their positive correlation in the specific market environment of our country.The research has proved that the narcissistic personality characteristics of leaders will have devastating economic consequences and researched the motivation of earnings management.Indeed,because of the limited time and ability,there are both limitations and shortcomings in theory and technology research.I will furtherly pay attention to these limitations and disadvantages,and solved in the future study,and I also sincerely urge professors to give suggestions and corrections to me.