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Military-experienced senior executives, corporate earnings quality, and firm value

Military-experienced senior executives, corporate earnings quality, and firm value

Li, Zhe, Liu, Xinrui ORCID: 0000-0001-9330-0974 and Wang, Bo (2023) Military-experienced senior executives, corporate earnings quality, and firm value. Journal of Accounting Literature. ISSN 0737-4607 (Print), 2452-1469 (Online) (doi:

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Purpose: Accounting scandals and earnings management problems at large firms such as Global Crossing and Enron have resulted in lots of wealth loss not only to corporate investors, but also led tremendous damage to societies. Hence, policymakers and academic researchers have started to explore mechanisms to prevent improprieties in financial reporting and further enhance firm value. Using data from U.S.-listed companies between 2000 and 2018, this article explores the effect of ex-military executives on earnings quality, the role of financial analysts in their interplay, and the firm value implication of earnings quality driven by ex-military executives.
Findings: Authors reveal that companies with ex-military senior executives exhibit lower levels of accruals-based and real earnings management than those without. The effect of management military leadership on constraining earnings management is more prominent for companies with low analyst coverage, suggesting that the military experience of executives could be a substitute for external monitoring. Authors also find that these ethical managers alleviate the negative impact of earnings management on firm value and that companies managed by these managers exhibit higher firm performance.
Design/methodology/approach: This study employs a firm fixed-effects model to validate the main conjecture and adopts the weighted least squares, Granger causality analysis, instrumental variable approach, propensity score matching, entropy balancing approach, and dynamic system GMM estimator to address robustness and endogeneity issues.
Originality/value: This article adds new insights to the literature on the role of managerial military experience in decision-making processes, financial reporting outcomes, and firm performance by employing the upper echelons and imprinting theoretical perspectives.

Item Type: Article
Additional Information: Publisher: Emerald Publishing Limited. Copyright © 2023, Emerald Publishing Limited.
Uncontrolled Keywords: accrual-based earnings management; firm value; imprinting theory; military experience and ethical leadership; real earnings management; top management team
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
U Military Science > U Military Science (General)
Faculty / School / Research Centre / Research Group: Faculty of Business
Last Modified: 22 Aug 2023 12:15

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