Management Demographic Characteristics, Auditor Choice and Earnings Quality: Empirical Evidence from Iran

Document Type: Research Paper


1 Department of Accounting, Bandargaz Branch, Islamic Azad University, Bandargaz, Iran

2 Department of Accounting, Payame Noor University (PNU), Tehran, Iran

3 Department of management, Gorgan Branch, Islamic Azad University, Gorgan, Iran



Recent accounting and management literature shows that demographic character-istics of top management and corporate performance are related. Accordingly, using a two-stage least squares regression model (2SLS), this study examines the relationship between some management demographic characteristics including CEO tenure, gender and level of education with earnings quality and auditor choice. Sample includes the 420 firm-year observations from companies listed on the Tehran Stock Exchange during the years 2013 to 2017 and research hypothesis was tested using multivariate regression models. The results show a significant and positive association between managers education level and higher auditor quality choice. In addition, we find that firms with female directors in the composition of the board of directors and with higher education levels, have higher earnings quality. The current study is almost the first study which has been conducted in Iran, so the findings of the study not only extend the extant theoretical literature in developing countries including emerging capital market of Iran, but also help investors, capital market regulators and accounting standard setters to make in-formed decisions.


Main Subjects

[1] Bahrisales, J., Yaghoob, B., Madadizadeh, E., Board’s characteristics and aggressive tax strategy, Management Accounting Quarterly, 2014, 22(7), P.53-67, (in Persian).

[2] Banimahd, B., Jafarima’afi, R., Accruals quality and auditor choice, Empirical studies in Financial Accounting Quarterly, 2013, 37(10), P.81-98, (in Persian).  Doi:10.22054/qjma.2016.6716

[3] Bamber, L.S., Jiang, J.X., Wang, I.Y., What's my style? The influence of top managers on voluntary corporate financial disclosure, Accounting Review, 2010, 85(4), P.1131-1162.  Doi:10.2308/accr.2010.85.4.1131

[4] Barker, V.L III., Mueller, G.C., CEO characteristics and firm R&D spending, Management Science, 2002, 48(6), P.782-801.  Doi: 10.1287/mnsc.48.6.782.187

[5] Barney, J.B., Firm resources and sustained competitive advantage, Journal of Management, 1991, 17(1), P.99-120.  Doi: 10.1177/014920639101700108

[6] Boyatzis, R.E., Self-directed learning: Develop your emotional intelligence, Executive Excellence, 2004, 21(2), P.11-12.

[7] Burke, R.J., Mattis, M.C., Women on Corporate Boards of Directors: International Challenges and Opportunities, Dordrecht the Netherlands, Kluwer Academic Publishers, 2000. Doi:10.1007/978-90-481-3401-4

[8] Bushman, R., Chen, Q., Engel, E., Smith, A., Financial Accounting Information, Organizational Complexity and Corporate Governance Systems, Journal of Accounting and Economics, 2004, 37(2), P.167-201, Doi:10.1016/j.jacceco.2003.09.005

[9] Carter, D.A., Simkins, B.J., Simpson, WG., Corporate governance, board diversity and firm value, Financial Review, 2003, 38, P.33-53.  Doi:

[10] Chan, R.Y.K., Cheng, L.T.W., Leung, T.Y., Corporate performance implications of relational demographic differences: On age and titles of chairpersons versus general managers of listed Chinese companies, British Journal of Management, 2011, 22(1), P.96-113.  Doi: 10.1111/j.1467-8551.2010.00710.x

[11] Cheng, L.T.W., Leung, T.Y., The Effects of Management Demography on Auditor Choice and Earnings Quality: Evidence from China, Review of Pacifc Basin Financial Markets and Policies, 2012, 15(2), P.1-37. Doi: 10.1142/S0219091511500093

[12] Cheng, L.T.W., R.Y.K., Chan., Leung, TY., Management demography and corporate performance: Evidence from China, International Business Review, 2010, 19, P.261-275.  Doi: 10.1016/j.ibusrev.2009.12.007

[13] Chevalier, J., Ellison, G., Are some mutual fund managers better than others? Cross-sectional patterns in behavior and performance, Journal of Finance, 1999, 54, P.875-900.  Doi: 10.1111/0022-1082.00130

[14] Dianatideilami, Z., Moradzadeh, M,. Mazaheri, A., The effect of CEO tenure on firm value, agency costs and information risk, Empirical Research in Accounting Quarterly, 2013, 9(3), P.21-39, (in Persian).  Doi:10.22051/jera.2013.587

[15] Day, D.R., Stogdill, R.M., Leader behavior of male and female supervisors: A comparative study, Personnel Psychology, 1972, 25, P.353-360.  Doi: 10.1111/j.1744-6570.1972.tb01110.x

[16] Dechow, P., Dichev, I., The quality of accruals and earnings: the role of accrual estimation errors, The Accounting Review, 2002, 77(1), P.35-59.  Doi:10.2308/accr.2002.77.s-1.35

[17] Farrell, K.A, Hersch, P.L., Additions to corporate board: The effect of gender, Journal of Corporate Finance, 2005, 11, P.85-106.  Doi: 10.1016/j.jcorpfin.2003.12.001

[18] Francis, J., A.H, Huang., S, Rajgopal., Zang, A.Y., CEO reputation and earnings quality, Contemporary Accounting Research, 2008, 25, P.109-147.  Doi:10.1506/car.25.1.4

[19] Gaio,C., Raposo, C., Earnings quality and firm valuation: internationalevidence, Accounting and Finance, 2011, 51, P.467-499.  Doi: 10.1111/j.1467-629X.2010.00362.x

[20] Gul, A.F., Srinidhi, B., Tsui, J., Board diversity and the demand for higher audit effort, Working paper, 2008.  Doi: 10.2139/ssrn.1359450

[21] Hambrick, D.C., Mason, P., Upper echelons: The organization as a reflection of its top managers, Academy of Management Review, 1984, 9, P.193-206.  Doi: 10.2307/258434

[22] Herrmann, P., Datta, D.K., CEO successor characteristics and the choice of foreign market entry mode: An empirical study, Journal of International Business Studies, 2002, 33, P.551-569.  Doi:10.1057/palgrave.jib s.8491031

[23] Hitt, M.A., L, Bierman., K, Shimizu., Kochhar, R., Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective, Academy of Management Journal, 2001, 44(1), P.13-28.  Doi:10.5465/3069334

 [24] Hoseini, M.,  Safari Gerayli, M., Valiyan, H., Demographic characteristics of the board of directors’ structure and tax avoidance: Evidence from Tehran Stock Exchange, International Journal of Social Economics, 2019, 46(2), P.199-212.  Doi: 10.1108/IJSE-11-2017-0507

[25]  Khabazkar Foomani, M., Sarlak, A,  Investigating the relationship among information asymmetry, dividend policy and ownership structure. Advances in Mathematical Finance and Applications, 2018, 3(2), P. 69-80. Doi: 10.22034/amfa.2018.540832

[26] Malmendier, U., Tate, G., Superstar CEOs, The Quarterly Journal of Economics, 2009, 124, p1593-1638.

[27] Namazi, M., Saeidi, M., The association between board’s characteristics and auditor choice, Journal of financial accounting and auditing, 2014, P.1-27, (in Persian).

[28]  Rezaei pitenoei, Y., Mohseni, K., The relationship between Board Gender Diversity and Internal Control Weaknesses, Women in Development & Politics, 2018, 16 (3), P. 439-456. Doi: 10.22059/jwdp.2018.259908.1007441

 [29] Rosener, J.B., Women on corporate boards make good business sense, Directorship, 2003, 29(5), P.7-11.

 [30] Saeed, A., Ziaulhaq, H., The Impact of CEO Characteristics on the Internationalization of SMEs: Evidence from the UK, Canadian Journal of Administrative Sciences, 2018, P.25-53.  Doi: 10.1002/cjas.1497.

 [31]  Salehi, A., Baharipour, A., Mohammadi, S., The Impact of Institutional Ownership on the Relationship between Tax and Capital Structure,  Advances in Mathematical Finance and Applications, 2016, 1(2), P.57-67. Doi: 10.22034/amfa.2016.527820

 [32] Tehrani, R., Ardakani, R,  Effect of Business Groups Affiliation on Cash Holdings and Return on Equity, Advances in Mathematical Finance and Applications, 2017, 2(4), P. 1-9. Doi: 10.22034/amfa.2017.536262

[33] Wally, S.,Baum, J., Personal and structural determinants of the pace of strategic decision making, Academy of Management Journal, 1994, 37, P.932-956.