CEO’S OVERCONFIDENCE AND THE RISK OF FRAUDULENT FINANCIAL REPORTING: EVIDENCE ON BRAZILIAN CAPITAL MARKET

EVIDÊNCIAS NO MERCADO DE CAPITAIS BRASILEIRO

Authors

  • Caritsa Scartaty Moreira Universidade Federal da Paraíba (UFPB)
  • Alex Ferreira Lopes Universidade Federal da Paraíba
  • Wenner Glaucio Lopes Lucena Universidade Federal da Paraíba
  • Orleans Silva Martins Universidade Federal da Paraíba

DOI:

https://doi.org/10.22561/cvr.v34i3.7412

Keywords:

Accounting Information. CEO Overconfidence. Risk of Fraudulent Financial Reporting.

Abstract

The quality and quantity of information available in a market reflects the preparation process of companies' financial statements, which can be impacted by behavioral biases on the part of their designers, such as in the case of overconfidence. These biases may be an explanation for the practice of possible opportunistic behavior when preparing accounting information. This study analyzes the relationship of managers' overconfidence with the Risk of Fraudulent Financial Reporting (RRFF) of companies listed on Brasil, Bolsa e Balcão (B3) from 2010 to 2019. For this purpose, the M-score was used as a proxy for RRFF. In addition, a ranking was built using the TOPSIS methodology (with the aid of entropy) to formulate the independent variable that measures overconfidence. The analyzed sample contains 211 companies, totaling 1,868 company-year observations that were analyzed using pooled linear regression. The results reveal a negative relationship between managers' overconfidence and the RRFF, which provides evidence that the personal characteristics of managers, in this case, overconfidence, have an impact on the quality of financial statements. Furthermore, the use of the M-score as a proxy for the Risk of Fraudulent Financial Reports brings greater robustness to the results achieved here, since it uses contemporary parameters, that is, updated according to the sample and period under study.

Author Biographies

Caritsa Scartaty Moreira, Universidade Federal da Paraíba (UFPB)

Doutora em Ciências Contábeis pelo Programa de Pós-Graduação em Ciências Contábeis da Universidade Federal da Paraíba (PPGCC/UFPB), Professora substituta do curso de Ciências Contábeis da Universidade Federal da Paraíba (UFPB) – Campus I, Jardim Cidade Universitária S/N – Castelo Branco, João Pessoa – PB, 58.051-900, caritsa_scarlaty@hotmail.com, +55 84 99116-1827.

ORCID: https://orcid.org/0000-0003-1243-9216

Alex Ferreira Lopes, Universidade Federal da Paraíba

Mestre em Ciências Contábeis pelo Programa de Pós-Graduação em Ciências Contábeis da Universidade Federal da Paraíba (PPGCC/UFPB), Professor substituto do curso de Ciências Contábeis da Universidade Federal do Delta do Parnaíba (UFDPar), Av. São Sebastião, 2819 – Nossa Sra. De Fátima, Parnaíba – PI, 64.202-020, alexferreiralopes12@gmail.com, +55 83 99309-6146.

ORCID: https://orcid.org/0000-0003-0307-6177

Wenner Glaucio Lopes Lucena, Universidade Federal da Paraíba

Doutor em Ciências Contábeis pelo Programa Multi-Institucional e Inter-Regional de Pós-Graduação em Ciências Contábeis UnB/UFPB/UFRN (PMIPCC – UnB/UFPB/UFRN), Professor do curso de Ciências Contábeis da Universidade Federal da Paraíba (UFPB) – Campus I, Jardim Cidade Universitária S/N – Castelo Branco, João Pessoa – PB, 58.051-900, wenner.lucena@academico.ufpb.br, +55 83 3216-7459.

ORCID: https://orcid.org/0000-0002-2476-7383

Orleans Silva Martins, Universidade Federal da Paraíba

Doutor em Ciências Contábeis pelo Programa Multi-Institucional e Inter-Regional de Pós-Graduação em Ciências Contábeis UnB/UFPB/UFRN (PMIPCC – UnB/UFPB/UFRN), Professor do curso de Ciências Contábeis da Universidade Federal da Paraíba (UFPB) – Campus I, Jardim Cidade Universitária S/N – Castelo Branco, João Pessoa – PB, 58.051-900, orleansmartins@yahoo.com.br, +55 83 3216-7459.

ORCID: https://orcid.org/0000-0002-4966-0347

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2023-12-24

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MOREIRA, C. S.; LOPES, A. F.; LUCENA, W. G. L.; MARTINS, O. S. CEO’S OVERCONFIDENCE AND THE RISK OF FRAUDULENT FINANCIAL REPORTING: EVIDENCE ON BRAZILIAN CAPITAL MARKET: EVIDÊNCIAS NO MERCADO DE CAPITAIS BRASILEIRO. Contabilidade Vista & Revista, [S. l.], v. 34, n. 3, p. 25–55, 2023. DOI: 10.22561/cvr.v34i3.7412. Disponível em: https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/7412. Acesso em: 28 nov. 2024.

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Vol. 34 No. 3 (2023): Volume 34| Número 3| set./dez. | 2023

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