​CEO Characteristics, Real Earnings Management, and the Role of Business Ethics Disclosure in Emerging Economies

Abstract

Purpose: This study investigates the influence of CEO narcissism, overconfidence, and executive experience on real earnings management (REM), with business ethics disclosure as a moderating variable, focusing on food and beverage firms listed on the Indonesian Stock Exchange.Research Methodology: Using a quantitative explanatory design, this study analyzes secondary panel data from 32 non-cyclical food and beverage companies during 2020–2024, resulting in 160 firm-year observations. The hypotheses were tested using pooled OLS regression with mean-centered interaction terms and robust standard errors.Results: The findings reveal that CEO narcissism has a positive and significant effect on REM (β = 0.0148, p = 0.031), whereas CEO overconfidence shows a stronger positive and significant effect (β = 0.0471, p < 0.001). Together, these characteristics explained 14.8% of the variation in the REM (Adjusted R² = 0.131). CEO executive experience has a negative but insignificant relationship with real REM. Business ethics disclosure does not significantly moderate the relationship between CEO characteristics and REM.Conclusions: CEO psychological characteristics play an important role in influencing earnings management practices, while voluntary ethics disclosure alone appears insufficient to mitigate such behavior.Limitations: This study is limited to one industry and a five-year period, while the business ethics index measures disclosure rather than actual ethical practices.Contributions: Theoretically, this study contributes to Upper Echelons Theory and Behavioral Agency Theory by highlighting the influence of CEO traits on earnings management. Practically, it emphasizes stronger corporate governance and ethical oversight.