Reemda Jaeschke

Corruption, Corporate Social Responsibility and Financial Constraints: International Firm‐level Evidence

This study examines the relationship between firm-level factors including corporate social responsibility (CSR) performance and financial constraints, and the firm-level risk of corruption. Facing a measurement challenge referring to firm-level risk of corruption, we define a corruption score based on corporate disclosures of corrupt activities. We show that, first, CSR performance is negatively related to the risk of corporate corruption. Second, a firms vulnerability to financial constraints is positively related to the risk of corporate corruption. Third, the effects are particularly strong for firms with low board independence. Finally, we contribute to prior literature by developing the first firm-level corruption score that is not only robust to prevalent corruption indices but is also applicable to any dataset and can be used for future research on firm-level corruption. Moreover, the study provides new empirical evidence on firm-level determinants that relate to corporate corruption risk.

The use of optimistic tone by narcissistic CEOs

The purpose of this paper is to examine how CEO narcissism can be related to the usage of an abnormal optimistic tone in financial disclosures. Drawing on upper echelons theory, this paper suggests a link between CEO characteristics, such as narcissism, and accounting choices, such as optimistic financial reporting language.,To measure the narcissistic trait of a CEO, the study builds on a model using a set of 15 archival indicators. The usage of an abnormal optimistic tone is assessed quantitatively when looking at firms’ 10-K filings, where “abnormal” refers to tone that is unrelated to a firm’s performance, risk, and complexity. This approach allows for the use of firm-fixed effects for a sample of US listed firms over the period 1992-2012.,The results show that CEO narcissism is significantly positively related to abnormal optimistic tone in 10-K filings. If a highly abnormal optimistic tone is present, the level of CEO narcissism is positively related to the likelihood of future seasoned equity offerings and larger future investments in research and development.,The findings are relevant for shareholders and stakeholders as well as auditors and legislators. All stakeholders should be aware of the overly optimistic reporting language resulting from CEO narcissism and need to make allowances for it when assessing firm performance based on financial disclosures.,This study is the first to show in a large-scale sample how CEO narcissism can be related to a firm’s use of optimistic language, and thus contributes to the question of how personality traits affect an organization’s financial reporting strategy.