Does Chief Audit Executive Tenure Affect CEO Overconfidence in Real Earnings Management? (JRAK)

Summary

• The sample covers manufacturing companies listed on the Indonesia Stock Exchange during the 2012–2019 period, analysed with a fixed-effects panel regression.p.1
• In Model 1, a one-unit increase in CEO overconfidence is associated with a 0.638-point increase in real earnings management.p.11
• A one-SD increase in CEO overconfidence corresponds to a REM increase of approximately 0.152 points, about 8% of REM's standard deviation.p.11
• CAE tenure has a coefficient of -0.155 on REM in Model 2, while the CEOV*CAE_T interaction of -0.175 is not significant.p.11
• Leverage has the largest and most stable effect among controls, with coefficients of 1.479–1.572.p.12
• CEO overconfidence is also positively associated with accrual earnings management, with coefficients of 0.130–0.164.p.13

Key insights

1. CEO overconfidence has a positive effect on real earnings management.p.1
2. Variance inflation factors range from 1.08 to 5.53, below the commonly accepted threshold of 10.p.10
3. Longer CAE tenure significantly reduces REM, but does not moderate the link between CEO overconfidence and REM.p.11
4. Market capitalization and firm age lose significance once CAE tenure is added in Models 2 and 3.p.12
5. CAE tenure has no significant effect on accrual earnings management.p.13