CEOs' experience of the Great Chinese Famine and accounting conservatism. (19th August 2020)

• Record Type: Journal Article
• Authors: Hu, Jun; Long, Wenbin; Tian, Gary Gang; Yao, Daifei (Troy)
• Is Part Of: Journal of business finance & accounting. Volume 47:Number 9/10(2020)
• Page Start: 1089
• Page End: 1112
• Publication Date: 2020-08-19
• Subjects: accounting conservatism -- CEO behavior -- CEO famine experience -- risk‐taking; Finance -- Periodicals; Accounting -- Periodicals; Business -- Periodicals; 658.15
• DOI: 10.1111/jbfa.12485
• Languages: English
• ISSNs: 0306-686X

Abstract

Abstract: This study investigates how a CEO's early‐life experience of the Great Chinese Famine affects corporate accounting conservatism. We find that companies whose CEOs had experienced famines in early life adopted more conservative accounting policies. This famine experience effect is more pronounced in high uncertainty environments proxied by non‐SOEs, politician turnovers and the adoption of International Financial Reporting Standards (IFRS). Additional tests indicate that CEOs with famine experience tend to support conservative accounting practices for contingencies and accelerate the recognition of asset impairments in negative events. Overall, consistent with imprinting theory, our results highlight the role of early‐life traumatic experiences in shaping CEOs' risk preferences and financial reporting policies.