Efeito das conexões sociais entre os CEOs e os membros dos conselhos de administração e fiscal sobre o gerenciamento de resultados

Abstract

Studies and guidelines have neglected that CEOs and board members may be socially connected. Social connections can be seen as elements that allow the approximation between individuals and can influence the discretionary of information sharing among the agents involved. Considering that economic decisions can be shaped by social factors, this thesis aimed to analyze the effect of social connections between CEO and board on the level of earnings management of Brazilian companies. To attend the aims of this study, a social connection index between the CEO and the board of directors of 141 sample companies was measured on the period of 2011-2017, resulting in 872 final observations. The index built consists of 5 indicators that characterize elements of social connection from the educational and professional background, and family relationship of the CEO and board members. The models of Jones (1991), Modified Jones (1995) and Modified Jones with ROA (2005) were used to calculate the accruals of the sample entities. To test the hypotheses of the study, econometric estimates were used from the multiple linear regression test with cross-section pools and clustered robust errors at the business level. As a robustness test, the models were reestimated with the indicators of social connection, in order to allow the evaluation of individual effects. Still as a robustness test, the equations with panel data regression with fixed effects were used. The results of the econometric tests show that the level of social connection between the CEO and the board of directors has a negative effect on earnings management, while no effect on the fiscal board is detected. When the indicators are individually evaluated, the connection given by education was significant and had a negative effect on the accruals calculated by the Jones model (1991) and the connection given by professional experience on the boards gave significance on the accruals measured by the Jones Modified (1991) and Jones Modified with ROA (2005). The results of the effect of the social connection between CEO and board members are consistent with all estimates. These results indicate a negative effect of social connection between the CEO and the board of directors on earnings management, thus improving the quality earnings. This thesis has, as methodological contribution, the creation of a metric that allows measuring the level of connection between CEO and boards. In the theoretical and empirical field, from the results found, this thesis adds studies by showing that elements of social interactions and personal relationships can benefit the board of directors in the exercise of its functions.