Degree of Managerial Confidence and Discretionary Expense Adjustments

This study examines the effect of CEOs' confidence on discretionary earnings management. The results are as follows: First, firms with CEOs with a higher degree of confidence have greater R&D and abnormal discretionary expenses than those without such CEOs. Second, for firms that slightly avoid losses, the higher the degree of managerial confidence, the smaller the discretionary R&D and abnormal discretionary expenses.

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