The effect of senior manager characteristics on accounting quality: A study on BIST manufacturing sector (2011-2020)

Ensuring the accounting quality is primarily the responsibility of the businesses. It is known that there are many macro and micro factors affecting the accounting quality of businesses. However, it is acknowledged that top management has a significant impact especially on the accounting quality of large public companies. In terms of the authorities and responsibilities, people in the position of general manager, executive and/or chairman of the board of directors, who have a significant weight and power in the top management of companies, and who are briefly referred to as CEO, are the subject of study in this thesis. Since it is thought that the CEO of the company can affect the accounting quality of the company by intervening in the production, reporting and organization processes of financial information, the relationship between CEO and accounting quality is studied here. The impact of corporate governance characteristics on earnings management practices is generally analyzed in the literature. However, there is no detailed study on the relationship between CEOs and accounting quality in the national literature. Addressing the gap in the literature, this study, which was conducted using data from 112 companies in the BIST Manufacturing sector between 2011 and 2020, first identified some important events and situations and observable demographic characteristics of CEOs in order to investigate the relationship between CEO and accounting quality, and then collected data on accounting quality and analyzed it with the help of models in the literature. The characteristics of the CEO are discussed within the scope of the upper echelons theory, and accrual and real activities earnings management models are used in the measurement of accounting quality. Discretionary accruals and abnormal items are calculated using the OLS method. In the accrual-based earnings management models, "discretionary accruals" and in the real activities earnings management model, "abnormal items" are used as proxy. The effect of CEO demographics on accounting quality was analyzed using the fixed effects and FGLS method. As a result, some issues related to CEOs and their demographic characteristics are found to be effective on accounting quality. For example, according to the FGLS method, a significant positive relationship was found between the CEO being a woman and four accounting quality proxies, and a significant positive relationship was found between the CEO accounting experience and two accounting quality proxies. Likewise, a positive and significant relationship was found between the age and gender of the CEO and real activities earnings management. On the other hand, a significant negative relationship was found between CEO accounting literacy and one accounting quality proxy in the fixed effects method, while a significant negative relationship was found between CEO accounting literacy and two accounting quality proxies in the FGLS method. It has also been observed that the results of these analyzes may differ according to sectors, businesses, methods and models.