The Moderating Effects of Family Control on the Relation between Managerial Overconfidence and Earnings Management

Abstract

This study investigates the relation between managerial overconfidence and earnings management and whether this relation is moderated by family control. Using a sample of Taiwan-listed firms, we estimate managerial overconfidence from manager dealings and determine the following: First, overconfident managers are more likely to engage in earnings management behaviors; second, family control negatively moderates the positive relation between managerial overconfidence and earnings management; and third, the negative moderating effects of family control primarily result from family chief executive officers.