The Accounting Review Vol. 96 No. 3 2021
The Impact of the CEO's Personal Narcissism on Non-GAAP Earnings
Abstract
Non-GAAP earnings provide managers the flexibility to exclude GAAP items to either produce a more informative performance measure or provide them the ability to opportunistically exclude recurring expenses from non-GAAP earnings. Prior literature examines the use of this form of disclosure at the firm level, although it is ultimately management's decision. We extend prior non-GAAP literature by examining whether the use and quality of non-GAAP earnings is influenced by CEO personality traits, namely, CEO narcissism. We find that narcissistic CEOs are more likely to exclude expenses from non-GAAP earnings and that the magnitude of exclusions is greater. We also find that those non-GAAP exclusions are more persistent and, thus, lower-quality. Our results shed light on the disclosure practice of non-GAAP earnings and show how narcissistic CEOs are more likely to take advantage of the discretion in financial reporting disclosures in order to benefit the firm and themselves.
- DOI
- 10.2308/tar-2017-0612
- Volume
- 96
- Issue
- 3
- Pages
- 1-25
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref