Chief Executive Officer’s (CEO) Age and Risk Taking Behaviour
The purpose of this study is to investigate the impact of CEO Age on risk taking, via their strategies in managing earnings.The empirical study is based on a data composed of 642 US public companies from 2010 to 2015. Firstly, we document a positive and significant relation between CEO Age and the degree of risk taking measured by the manipulation of the real activities. In a supplement analysis, we find that this relation is not monotonic; it has a U-Shape with an inflexion point equal to 46 years. Our study contributes to the existent literature on accounting by identifying that CEO Age is a determinant component of real earnings management. Therefore, stakeholders of firms managed by an old CEO should be more careful when evaluating the quality of firm’s financial statements. In addition, external auditors and SEC should be more diligent when dealing with financial reports elaborated by old CEOs.