Manager Regulatory Focus and Asymmetric Timeliness of Earnings
Wen-Hsin Hsu/Department of Accounting, National Taiwan University
Lin-Chih Wu/Henley Business School, University of Reading Malaysia
Abstract
Motivated by prior studies that examine the effect of managerial attributes on corporate policies and strategies, this study examines the relationship between CEOs’ regulatory focus and accounting conservatism as measured by asymmetric timeliness of earnings. According to regulatory focus theory (Crowe and Higgins 1997), people with promotion focus are more willing to take risks to seek achievement, whereas people with prevention focus are more conservative to avoid mistakes. We measure accounting conservatism using Basu’s (1997) model and C_Score (Khan and Watts 2009) and examine whether CEOs with the prevention focus are more conservative than CEOs with the promotion focus. We find that CEO’s prevention focus is positively associated with accounting conservatism, suggesting that CEOs with prevention focus are more risk-averse and have a higher tendency to be conservative than the other CEOs.
Keywords
Regulatory focusPromotion focusPrevention focusAccounting conservatism
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