Impact of Reputation and Chief Executive Officer’s Job Security on Financial Reporting Transparency

  Individual characteristics of chief executive officers, CEOs, such as reputation and job security may eclipse their behavior and types of decisions in the organization, and thereby affect the transparency of financial reporting. In this research, the influence of reputation and CEOs’ job security on the transparency of financial reporting has been examined. Taking into account research constraints, 110 companies accepted in the Tehran Stock Exchange, TSE, over the period 2010-2016 have been surveyed. To measure the reputation variable we used the media coverage of CEOs, to measure the variable of CEOs’ job security we used the two indicators of sales volatility coefficient and CEOs’ tenure, and to measure financial reporting transparency we used a multidimensional criterion covering a wide range of concepts related to the transparency. Data collection source consists of companies' financial statements, reports of board activities and independent auditor, as well as the news agency affiliated to the TSE. In this study due to controlling the effects of years and industry, fitting of model was done in a cross-sectional framework, and then, robust standard error method was used to test the hypotheses. The results showed that the CEOs’ reputation has positive significant impact on the transparency of financial reporting. Also, there is a positive non-significant relationship between the variables of sales volatility coefficient and the CEOs’ tenure as the indicators of job security and transparency of financial reporting, respectively. Finally, the results showed that reputation and job security (sales volatility coefficient) have positive and significant effect on transparency of financial reporting, simultaneously. According to the results of this study, it is suggested investors and financial information users pay attention to the reputation of CEOs, and if necessary, to the reputation and CEOs’ job security, simultaneously, in assessing the transparency of financial reports of the TSE companies.