CEO FACIAL MASCULINITY, CHARACTERISTICS AND EARNINGS MANAGEMENT

Abstract

The present study aimed to examine whether CEO facial masculinity and CEO characteristics help in predicting earnings management (EM). The analyses were based on a panel data of 260 companies listed in Bursa Malaysia over the period 2009 to 2019 with a final sample of 2860 observations. Panel data analysis with fixed effect model was utilized to estimate the results. The results revealed that using facial width-to-height ratio (fWHR) and testosterone (TESTN) as the proxies for CEO facial masculinity had a statistically significant effect on EM. This effect was positive, which indicated that the increasing dimension of fWHR and increasing levels of TESTN of a CEO were associated with higher levels of EM. The results also indicated that CEO turnover and CEO race had a significant influence on EM suggesting that non-Bumiputra CEO and high turnover of CEO are more likely to be associated with EM practices. The findings contribute to resolve the controversy in the results of prior studies regarding the influence of CEO facial masculinity on financial reporting quality. The study helps to understand and forecast CEO behaviour using a difficult-to-manipulate biological signal, as well as to the appointment of a new CEO based on their characteristics.