The Effect of CEO Personal Characteristics on CEO Overconfidence in Doing Earnings Management in Manufacturing Companies in Indonesia

Authors

  • Tysna Dyah Ayu Pramesti

    Author

  • Endang Sri Andayani

    Author

  • Sri Pujiningsih

    Author

DOI:
https://doi.org/10.59889/p6fxey38
Keywords:
Personal Characteristics of CEO, CEO Overconfidence, Earnings Management
Abstract

This research aims to test Upper Echelons Theory by researching the relationship between CEO overconfidence and decisions in Earnings management. This research also identifies whether monitoring from external parties, especially institutional shareholdings, plays an important role in moderating Earnings management decisions concerning the behavior of overconfident CEOs. The author uses the CEO's characteristics based on age, education level, and work experience, while overconfidence is measured based on the CEO's portfolio decisions. The sample comprises 68 manufacturing companies listed on the Indonesia Stock Exchange from 2017-2019. The results showed that age and work experience did not affect CEO overconfidence, while education level had an effect. Furthermore, the CEO's characteristics (age, education level, and work experience), through overconfidence, do not affect Earnings management. Other results also show that overconfidence does not affect Earnings management. The moderating effect of institutional share ownership has no effect on CEO overconfidence in Earnings management. The results of this research can benefit users of financial information, namely internal parties (management), as a material consideration in selecting a CEO. As for external parties (government, investors/potential investors, and creditors/prospective creditors) can be used as a performance appraisal and a basis for decision-making.

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Published
2022-09-30
Issue
Vol. 2 No. 3 (2022): September, 2022
Section
Articles
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Copyright (c) 2022 Tysna Dyah Ayu Pramesti, Endang Sri Andayani, Sri Pujiningsih (Author)

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How to Cite

Pramesti, T. D. A., Andayani, E. S., & Pujiningsih, S. (2022). The Effect of CEO Personal Characteristics on CEO Overconfidence in Doing Earnings Management in Manufacturing Companies in Indonesia. International Journal of Economics, Management, Business, and Social Science (IJEMBIS), 2(3), 473–484. https://doi.org/10.59889/p6fxey38

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