Introduction
The interdisciplinary approach to the understanding of the mechanisms of the business environment enabled researchers from the different scientific fields to combine their knowledge to analyze the biological, physiological, psychological, and humanitarian reasons behind the accounting practices. Thus, in accounting management, earnings manipulations and earnings management can be associated with a set of masculine features. In other words, the incentives that result in the executives’ actions can be attributed equally to the sets of different factors, including those of the biological nature.
Hypothesis Development
The current level of the research in the field of correlation between biological traits and business behavior gives some space for speculations and hypothesis developments. From the perspective of the biological standpoint, the levels of a steroid hormone testosterone can be linked to a certain type of facial structure and building of the central nervous system. The reason for that is that from the early stages of its developments, the brain substantially responds to the levels of testosterone in the organism, influencing the cognitive abilities and personal traits. Such an aspect, of course, cannot be regarded as the sole source of human behavior, but neither can it be denied. Therefore, even though the neuroscientists cannot give a definite answer about those correlations yet, in everyday practice, it is common to link such facial features to more masculine behavior (Becker 13).
Moreover, the facial masculinity was associated with the financial performance among the executives (Wong, Ormiston and Haselhuhn 1480). The poor performance of the firm can be the result of numerous factors, but it is commonly linked to the effectiveness of the managers. Therefore, the hypothesis is that the CEOs with more masculine traits both in their appearances and in psychosomatic patterns would be more persistent in trying to avoid the poor financial performance, including the use of such options as misreporting and earnings management.
The research conducted by Jia, Van Lent, and Zeng (2014) included the analysis of 1,136 pictures of the CEOs (Jia, Van Lent and Zeng 1198). In the literature concerning the tendencies of financial misreporting, a small number of studies link such a practice to the personalities of the executives. However, the more common interpretation is the correlation between the earnings manipulation activities and the management styles (Garen 1186).
Nevertheless, according to the studies, the personal characteristics of the CEOs can be associated with the style of their financial reporting and, therefore, the tendencies of earnings management (Davidson, Dey and Smith 32). Since, on the biochemical level, testosterone affects some aspects of the cognitive perception, the CEOs with different levels of masculine traits interpret the social interactions, including the financial aspects, in different ways.
The Facial Width-to-Height Ratio and the Construction of the Executive Pictorial Database
The validity of the different ratios and proportions that are meant to define the levels of masculine behavior is still discussed at the interdisciplinary level. The studies manifest the correspondence between saliva-assayed testosterone and a range of facial features associated with masculinity (Case and Paxson 464). In the research conducted by Jia, Van Lent, and Zeng (2014), the precise facial width-to-height ratio that is perceived as masculine appearance was studied using photographs analysis (Jia, Van Lent and Zeng 1207).
The exhibits of the executive pictorial database were rated by the control group to measure the impression of reliability and masculinity. After the procedure, the masculine facial features were cross-sectioned with the CEOs’ involvement in the earnings management and financial misreporting activities.
Sample, Misreporting Measures, and Summary Statistics
The result of the cross-section examination of the collected samples showed that the CEOs with more masculine facial features tend to have “shorter tenure, higher pay rates, performance sensitivity in newly granted options but less valuable equity holdings” and are more likely to work in older companies (Jia, Van Lent and Zeng 1215).
Misreporting and the Executives’ Facial Width-to-Height Ratio
In the context of the business environment, the masculine manner is associated with overconfident positioning. The executives’ overconfidence is directly connected to the financial reporting, affecting the levels of truthfulness and cautiousness in the financial actions and accruals (Garen 1186).
Insider Trading, Stock Option Backdating, and the Executives’ Facial Width-to-Height Ratio
In terms of insider trading, the level of masculine behaviors of the executives can define the use of either routine or opportunistic approach. The CEOs with the facial width-to-height ratio corresponding to masculinity tend to be more opportunistic. Stock option backdating, in its turn, depends on the managerial strategy of the company, which can be affected by the personality of the executive.
Additional Analysis and Conclusions
Thus, with the help of a psychological approach, we can define certain traits that predetermine the managers’ potentials and the patterns of their financial actions and business behavior. However, there are also biological features that can potentially influence the decision-making. It would be inaccurate to claim that the biological component is solely able to make an impact on the managers’ behavior. Nevertheless, interdisciplinary researchers need to find further mechanisms of the correlation between the biological factors and the masculine behaviors in the business environment.
Works Cited
Becker, Gary S. “The economics of crime.” Cross Sections 3.1 (1995): 8-15. Print.
Case, Anne, and Christina Paxson. “Height, Health, and Cognitive Function at Older Ages.” The American Economic Review 98.2 (2008): 463-467. Print.
Davidson, Robert, Aiyesha Dey, and Abbie Smith. “Executives’ “Off-the-Job” Behavior, Corporate Culture, and Financial Reporting Risk.” Journal of Financial Economics 1.1 (2013): 1-71. Print.
Garen, John E. “Executive Compensation and Principal-Agent Theory.”Journal of Political Economy 1.1 (1994): 1175-1199. Print.
Jia, Yuping, Laurence Van Lent, and Yachang Zeng. “Masculinity, Testosterone, and Financial Misreporting.” Journal of Accounting Research 52.5 (2014): 1195-1246. Print.
Wong, Elaine M., Margaret E. Ormiston, and Michael P. Haselhuhn. “A Face Only an Investor Could Love: CEOs’ Facial Structure Predicts Their Firms’ Financial Performance.” Psychological Science 22.12 (2011): 1478-1483. Print.