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CFO Age and Real Earnings Management

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posted on 2022-09-08, 01:51 authored by Zihao Zhou

This study examines the relationship between chief financial officer (CFO) age and real earnings management. Real earnings management is proxied by abnormal operating cash flows, abnormal production costs and abnormal discretionary expenses. Based on the extant literature, I develop two competing hypotheses in relation to CFO age and real earnings management. Using a sample of publicly listed US companies over the period from 2007 to 2018, I find a significant positive relationship between CFO age and real earnings management, implying that younger (older) CFOs engage less (more) in real earnings management. I also find that the negative relationship between younger CFO and real earnings management is more pronounced in the presence of younger CEO, CEO-chair separation and higher level of institutional ownership. Findings from the empirical analysis remain robust across alternative metrics of CFO age and real earnings management. Using two-stage least squares estimation, I show that the documented finding is not subject to the endogeneity problem. Overall, this study contributes to corporate governance literature and earnings management literature by identifying a robust relationship between CFO age and real earnings management.


Table of Contents

1. Introduction -- 2. Background: CFO’s earnings manipulations -- The case of Andrew Fastow (ex-CFO of Enron Corporation) -- 3. Literature review and hypothesis development -- 4. Sample selection and research design -- 5. Empirical results -- 6. Conclusion – Bibliography -- Appendix


A thesis in fulfilment of requirements for the Degree of Master of Research

Awarding Institution

Macquarie University

Degree Type

Thesis MRes


Thesis (MRes), Macquarie University, Macquarie Business School, Department of Accounting and Corporate Governance, 2020

Department, Centre or School

Department of Accounting and Corporate Governance

Year of Award


Principal Supervisor

Mostafa Monzur Hasan


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62 pages

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