The Dynamic Impact of Merchant Guild Cultural Factors on Corporate Earnings Management

This research looks into how CEOs with a background in merchant guild culture affect companies’ management of their earnings. Using Chinese listed companies on the Shanghai and Shenzhen A-share markets as examples, the study begins by looking at the influence of CEOs with a merchant guild cultural background on corporate earnings management, aiming to better understand how cultural factors dynamically shape this management practice. The study finds that companies led by CEOs with a merchant guild cultural background tend to engage less in both accrual and real earnings management. However, this effect becomes less strong when companies face high internal performance pressure or a lot of external monitoring from the media. Additionally, when the CEO’s role is separate from the chairperson’s role, or when the auditor has a good reputation, the level of real earnings management is notably lower. This research broadens the study of upper echelons theory and explores the relationship between merchant guild culture and corporate governance. The findings offer useful ideas for investors and regulators to understand how companies make business decisions and develop.