CEO’s Home Feeling And Enterprise Earnings Management

In recent years,informal institution has gradually become a hot research field.The mainstream views believe that informal institution could promote social progress and economic development.Home feeling is one of the important informal institutions.The informal institution represented by home feeling plays a more important role in China.As the main part of corporate decision-making and governance,corporate executives may bring specific economic consequences to their enterprises because of their home feeling.At present,existing literature has deeply explored the influence of senior executives’ home feeling on corporate environmental governance,tax avoidance,investment performance and other aspects.However,with the rapid development of our capital market,information distortion of financial statements becomes increasingly serious in listed companies,and the earnings management behavior becomes increasingly prominent.Therefore,this thesis connects home feeling with earnings management behavior of enterprises and examines the influence of the CEO’s home feeling on earnings management of enterprises.Based on the social identity theory,reputation theory and relational contract theory,this thesis sorts out the literature related to home feeling and corporate earnings management,uses empirical research to verify the relationship between CEO home feeling and corporate earnings management and introduces regional economic development level and media exposure as specific indicators to verify the influence path.In addition,this thesis explores the moderating effect of external heterogeneity factors such as marketization level and the degree of Confucian culture and the influence of CEO’s home feeling on the three methods of real earnings management.Data of this thesis is collected from Shanghai and Shenzhen stock exchange A-share,and this thesis selects non-financial listed companies from 2007 to 2020 as research sample.The results show that:(1)CEO’s home feeling has an inhibitory effect on real earnings management,while the inhibitory effect on accrual earnings management is not significant.(2)The home feeling of CEO could give rise to the motivation of rewarding hometown and maintaining reputation.Driven by the above two motivations,the real earnings management degree of the enterprise will be reduced.(3)In areas with a low level of marketization and a strong Confucian culture,the CEO’s hometown feeling has a stronger inhibitory effect on the real earnings management of enterprises.(4)CEO’s home feeling reduces the real earnings management level of enterprises mainly by restraining cost manipulation and production manipulation of enterprises.As an important part of informal institution,the existing literatures on the influence of home feeling on enterprise behavior is not rich.The main contribution of this thesis is to reveal the effect of CEO’s home feeling on earnings management behavior of enterprises,explore the mechanism of CEO’s home feeling on earnings management behavior of enterprises,provide a certain reference basis for the selection and training CEO,and also provide a new idea for the government to regulate earnings management behavior of listed companies.