Banca de DEFESA: Antônio Jose Rosa da Silva

CHANGE OF CEO AND MANAGEMENT OF ACCOUNTING RESULTS IN BRAZILIAN FINANCIAL INSTITUTIONS

Financial Institutions. Big Bath Accounting. CEO. Gender. Diversity.

This study aimed to measure the impact of the change in the chief executive officer (CEO) on the earnings management in Brazilian banks. A literature review was conducted on the management of accounting results in banks in Brazil, as well as the identification of international productions on the subject. In the review of the national literature, 23 studies published in journals between 2006 and 2022 were identified, focused on the investigation of a specific type of earning management, mainly income smoothing with the use of Loan Loss Provision (LLP). In the research, various types of specific discretionary accruals are used, in addition to different metrics and models. Based on the theoretical gap observed about the influence of the CEO in the occurrence of big bath accounting in Brazilian banks and the knowledge of different models accepted in the literature to ascertain the earning management in banks in Brazil, the methodological design of this study was developed exploring the common methods in the literature, investigating both individual institutions and financial conglomerates. The data collected was accessed through the website of the Central Bank of Brazil, covering the periods from 2012 to 2022. The analysis for individual institutions and financial conglomerates was through regressions that related the variables of interest on the new CEOs with the LLP expense accruals, calculated according to one or two-stage models, depending on data availability. The results for individual institutions confirmed only income smoothing, showing that discretionary expense with LLP occurs more intensively in the semester following the arrival of the new CEO. The result for financial conglomerates proves that new CEOs practice big bath accounting when they take over, increasing the accruals as soon as they start management. The increase in discretionary accruals at the beginning of the mandate of the new CEO coming from outside the bank was not confirmed. It was confirmed the reduction in earnings management when a new woman CEO takes office. The research contributes to increasing the understanding of earning management practices in Brazilian financial institutions, mainly the practice of big bath accounting, still little explored by the literature. Also highlighted are the evidences of the small female participation and the peculiarities of their management in the highest executive position of Brazilian banks. Furthermore, the research points out directions for future investigations in this field.