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Financial reporting frauds: A manifestation of hubris in the C-suite? Some exploratory evidence. (2012)

“The authors investigate the relationship between CEO hubris, a firm’s managerial, governance and market oversight attributes, and a propensity to financial misreporting.

 

Michel Magnan, John Molson School of Business Concordia University,
Denis Cormier, Department of Accountancy UQAM,
Pascale Lapointe-Antunes, Department of Accounting, Goodman School of Business

Management Ethics, Summer/Fall 2012, Canadian Centre for Ethics and Corporate Polic

The authors investigate the relationship between CEO hubris, a firm’s managerial, governance and market oversight attributes, and a propensity to financial misreporting.

They find managerial hubris (indicated by proxies such as active mergers and acquisitions strategy, complex corporate structure, top-rated managers) fed by fawning media and financial analysts, may drive financial misreporting.

Governance and market oversight processes do not seem to have been effective in detecting or preventing financial misreporting, with independent boards of directors proving especially ineffectual. The findings suggest that formal processes may get coopted by a managerial (C-) suite culture that houses hubristic tendencies.

Read the full article here: http://www.cifo.uqam.ca/publications/pdf/2013-02.pdf

The lead author expands on the work in an article on page 8 of the summer/fall 2012 edition of Management Ethics, the journal of the Canadian Centre for Ethics & Corporate Policy.

Here, he refers to the cases of Micheline Charest, founder, controlling shareholder and co-CEO of CINAR which became the target of endless allegations based on its use of tax credits, its financial reporting, its use of investment tax havens, and copyright infringement: and Garth Drabinski of Livent Inc. another business that suffered a precipitous crash.

For the Management Ethics article, visit: http://www.ethicscentre.ca/EN/files/newsletters/Management_Ethics_summer_2012.pdf

 

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