Effect Social Dominance , Machiavellianism and Emotional Manipulation on Earnings Overstatement : A test of Upper Echelons Theory

Abstract

Earning overstatement is actually one of the forms of earnings management whereby the entity's management tries to avoid reporting losses. The purpose of this study is to investigate the effect of psychological variables such as Social Dominance, Machiavellianism and Emotional Manipulation on Earning Overstatement by using of upper echelons theory. In this theory, organization's performance is a function of the top managers' characteristics. In this study, the research hypotheses is tested on the basis of structural equations. For this purpose, We is select a sample of 401 accounting experts, accounting chiefs and financial managers of the Tehran stock exchange listed firms. Theoretical foundations of the research were collected through library studies and research data were collected through a questionnaire. The results of this study show that Social Dominance, Emotional Manipulation and Machiavellianism have a positive effect on Earnings Overstatement. Machiavellianism, on the other hand, has a direct effect on Social Dominance and Emotional Manipulation. Also, Machiavellianism indirectly and positively affects Earnings overstatement through Social Dominance and Emotional Manipulation. These results can have important implications for accounting and finance researchers as well as organizations related to this field.

Keywords

• social dominance
• machiavellianism
• emotional manipulation and earnings overstatement