This work aimed to explore the relationship between CEO overconfidence and earnings management and whether this relationship is moderated by accounting secrecy culture.
Based on panel data from 1,396 environmental, social and governance-listed firms (2010–2022), this study examines the moderating effect of accounting secrecy culture on the link between CEO overconfidence and accrual-based earnings management. Robustness and endogeneity issues are addressed using alternative measures, two-stage least squares (2SLS) and the Heckman two-step method.
The empirical findings show that CEO overconfidence has a significant positive effect on accrual-based earnings management. Moreover, the results reveal that accounting secrecy culture strengthens this relationship, suggesting that in environments where secrecy is culturally embedded, overconfident CEOs are more likely to engage in earnings manipulation. These findings remain robust across alternative specifications and after addressing endogeneity issues using 2SLS and the Heckman two-step approach.
By analyzing the moderating role of accounting secrecy culture, this study extends the literature on CEO overconfidence and earnings management. It offers novel cross-country evidence on how national accounting secrecy norms shape the impact of managerial cognitive biases on financial reporting quality.
