CEO Behavioral Integrity, Auditor Responses, and Firm Outcomes

For helpful comments and suggestions, we thank Divya Anantharaman, Dirk Black, Rick Cazier, Qi Chen, Preeti Choudhary, Dane Christensen, Josh Coyne, Bart Dierynck, Alexander Dyck, Frank Ecker, Yonca Ertimur, Jennifer Francis, David Hirshleifer, Michael Jensen, Scott Judd, Sam Melessa, Kevin Markle, Per Olsson, James Pennebaker, Kristi Rennekamp, Naomi Soderstrom, Katherine Schipper, Terry Shevlin, Mike Stuart, Siew Hong Teoh, Laurence van Lent, Alex Young, and seminar participants at the 2014 Allied Social Science Associations (ASSA) Annual Meeting, the 2012 American Accounting Association (AAA) Annual Ethics Research Symposium, the 2012 AAA Southeast Region Meeting, the 2013 AAA Management Accounting Section Midyear Meeting, the 2012 Annual Conference on Financial Economics and Accounting (CFEA), the 2014 Brigham Young University (BYU) Accounting Symposium, the Division of Economic and Risk Analysis at the Securities and Exchange Commission (SEC), the 2012 Southeast Summer Accounting Research Conference (SESARC), and the following universities: Bocconi University, Duke University, University of Graz, Harvard University, Indiana University, University of California, Irvine, The University of Melbourne, University of Minnesota, The University of Oklahoma, University of Southern California, Wake Forest University, University of Waterloo, and Yale University. We thank Fred Kiel at the KRW Research Institute for providing the survey data used in this paper, Chris Parsons for providing the CEO ratings from Glassdoor.com, Irene Kim for providing class action litigation data, Lucian Bebchuk for making available data on lucky option grants, Lindsay Mongillo for collecting the CEO press citation data, Xiaoding Liu for running several robustness checks, Weili Ge for providing the FSCORE data, and Peter Demerjian for providing the managerial ability data. We thank the anonymous members of the National Investor Relations Institute (NIRI) who answered our shareholder letter survey questions. We also thank Ariel Finno, NIRI director of research, and Jim Cudahy, NIRI CEO and president, for helpful discussions and for facilitating our survey among the NIRI membership. Thomas D. Steffen is also grateful for financial support provided by the Kenan Institute for Ethics at Duke University.

This paper was previously titled “Honoring One's Word: CEO Integrity and Accruals Quality,” which was the 2012–2013 recipient of the Glen McLaughlin Prize for Research in Accounting Ethics from the School of Accounting at The University of Oklahoma.

Supplemental material can be accessed by clicking the link in Appendix B.

Editor's note: Accepted by Gregory S. Miller, under the Senior Editorship of Mark L. DeFond.