Managers: Their Effects on Accruals and Firm Policies


  • Douglas Dejong,

    Corresponding author
    • the University of Iowa
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  • Zhejia Ling

    1. Iowa State University
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    • The authors thank Forbes and Kevin J. Murphy for generously providing the data. They also thank John Geweke, Cristi Gleason, Paul Hribar, Rick Mergenthaler and Eugene Savin for their helpful discussions. The authors are grateful to the Editor, Peter Pope, an anonymous referee, and the workshop participants at the University of Iowa, Tilburg University, Chinese University of Hong Kong, Rotterdam School of Management, 2009 Midwest Accounting Research Conference, 2009 American Accounting Association Annual Meeting and 2010 European Accounting Association Meeting for their valuable comments. Errors are the authors’ responsibility.

Address for correspondence: Douglas DeJong, Accounting, W252 John Pappajohn Bus Bldg, Tippie College of Business, The University of Iowa, Iowa City, IA 52242, USA.



This paper investigates whether top executives have significant individual-specific effects on accruals that cannot be explained by firm characteristics. Exploiting individual executive and firm data from a period of 37 years, we find that individual executives play a significant role in determining firms’ accruals. We examine whether executives’ effects on accruals are related to their personal styles on firm policies, investment, financing and operating decisions. Our results show that individual executives’ effects on accruals are more correlated with their operating decisions than investment and financing decisions. We next investigate whether managers themselves also have a personal style for directly affecting accruals. We compare effects exerted by CEOs to CFOs. We find CEOs are more likely to affect accruals through firm policy decisions and CFOs are more likely to affect accruals through accounting decisions. CFOs tend to report more ‘solid’ earnings than CEOs, i.e., CFOs are more likely to push accruals to zero.