CentER

Yuping Jia

Date of Ph.D. defense:	16 December 2008
Title of thesis:	Essays on the Role of Managerial Type in Financial Reporting
ISBN:	978 90 5668 230 9
Promotores:	Prof.dr. L.A.G.M. van Lent, Dr. E. Cardinaels

Abstract:
In the wake of bookkeeping scandals, a global credit crunch, and increased regulatory scrutiny, public attention has once more turned towards corporate financial reporting practices. Increasingly, investors, regulators, and the business press recognize the importance of high quality financial statements in the smooth working of financial markets. When asked, researchers have traditionally explained variations in accounting quality between firms by referring to the differences these corporations face in fundamental economic and operational circumstances. This explanation, however, does not tally with the common intuition that CEOs and other senior managers exert significant personal influence over reporting choices. Hence, it would seem natural to examine the association between the type of senior manager and the quality of financial statements. In this dissertation, I combine two methodologies to venture a first attempt to explore the effect of managerial type on accounting quality. In an experimental study, I show that incentive compensation and social context (i.e., the behavior of other managers in the firm) are associated with how truthfully managers report their performance. I also document the effect of gender and social value orientation (i.e., how much the manager cares about others); both of these variables can be thought of as capturing managerial type. In two large-scale archival studies, I instrument for managerial type by identifying managers accused of illegal compensation practices. I then compare the reporting behavior of these managers with those of other firms, while controlling for differences in economic fundamentals between the firms. Together these studies provide strong evidence that managerial type influences financial statement quality.

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