An Empirical Study On CEO Overconfidence And Earnings Smoothing

Earnings smoothing as a possible outcome of earnings management,it's a rational choice which is beneficial to the enterprise under the existing accounting system and capital market supervision system,it is not a simple accounting behavior,but the result of multi-interest game.As a CEO of company,CEO needs to make the company's financial report be smoother to meet the interests of all parties.The traditional research is based on the assumption of "rational economic man" hypothesis,lack of research on the psychological mechanism of CEO,but more and more studies have found that CEOs have excessive self-confidence psychological tendencies.Then the CEO of company in the decision-making whether there is excessive self-confidence psychological tendencies?Will this tendency affect its earnings smoothing behavior?The existing settlement of the earnings smoothing behavior is based on principal-agent theory,contract theory and information asymmetry theory,emphasizing the impact of corporate governance differences on earnings smoothing behavior,ignoring the CEO' s irrational behavior may affect the the earnings smoothing behavior.CEO's behavioral characteristics plays an important role in the company's development,overconfident CEO is bound to bring some risks to the development of the company,because of CEOs' knowledge,ability and their position,they will inevitably produce excessive self-confidence.Therefore,the study of CEO's excessive self-confidence behavior characteristics provides a new way of thinking for us to understand earnings smoothing behavior better,from the optimization of corporate executives to improve corporate governance.Based on the summary of research results of domestic and foreign overconfidence and earnings smoothing,this paper analyzes the behavioral finance theory and analyzes,it through the American credit rating company Standard&Poor's Compustat database in North American region from 1991 to 2015 for all companies.The empirical analysis of the data shows that the CEO' s overconfidence has a direct impact on the earnings smoothing,and the overconfident CEO is doing more earnings smoothing behavior than the rational CEO,and further studies have found that overconfident CEOs earnings smoothing behavior when the probability of adjusting the surplus upward is more rational than the CEO,making the surplus curve slope even larger.The main innovations of this paper are as follows:(1)The research on executive and earnings management in the existing literatures at home and abroad mainly focuses on the research of management and senior management team and earnings management,while the research on earnings smoothing is relatively,and earnings smoothing is an important means of earnings management and needs to be studied separately.This paper starts from the special position of CEO,which plays a key role in corporate earnings,and studies the influence of CEO overconfidence on corporate earnings smoothing behavior.This is not only conducive to enrich and expand the behavioral finance research,but also to expand the earnings management related research.(2)an in-depth analysis of the overconfidence of CEO earnings in the company's earnings,the possible adjustment of earnings tendencies,and rational CEO to do the difference comparison for the earnings smoothing behavior.