Does CEO narcissism matter? An examination of the relationship between board structure and earnings management in Kenya

Abstract

Purpose – This paper examines how board structure influences real earnings management and the interaction effect of CEO narcissism on board structure-real earnings management relationship. Design/methodology/approach – The authors used panel data derived from secondary sources from publicly listed firms in Kenya during 2002–2017. Hierarchical regression analysis was used to test the hypotheses. Findings – The results indicate that board independence, board tenure and size have significant negative effect on real earnings management, while CEO duality positively affects real earnings management. Further, the interaction results show that CEO narcissism moderates the relationship between CEO duality and real earnings management. Research limitations/implications – The results suggest that real earnings management reduces when boards are independent, large and comprising of long-tenured members. However, when the CEO plays dual role of a chairman, real earnings management increases. The authors also find that when CEOs are narcissists, the monitoring role of the board is compromised. Originality/value – The study adds value to the understanding of how board structure and CEO narcissism influence the monitoring role of the board among firms listed at Nairobi Securities Exchange.

Keywords

• Board structure
• CEO narcissism
• Real earnings management
• Kenya