This study examines the effect of CEOs’ confidence on discretionary earnings management, and specifically on discretionary expense 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. We also observed weak results that firms with slightly avoid decreases earnings and ROE slightly higher than 5% recorded less discretionary R&D expenditures. These results suggest that target earnings are prioritized over investments in situations with high earnings management incentives. Third, we find that these real earnings management behaviors are conducted simultaneously with accounting earnings management.
