Managerial overconfidence and real earnings management: Evidence from Korea

초록

This study places a focus on overconfidence as part of managers' cognitive characteristics and examined its impact on real earnings management. On studying companies listed on the Korea Exchange for the period 2000 to 2011, managerial overconfidence was found to be in a negative (+) relation with real earnings management. In other words, overconfident managers did not favor real earnings management. In previous studies, it was revealed that overconfident managers increase earnings to make up for performance deterioration due to their misjudgment. Because most of the Korean firms are family firms that put emphasis on long-term value, they tend to avoid real earnings management while seeking to redeem performance deterioration resulting from their wrong decisions, as it can destroy such value. © 2016 International Information Institute.

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