Playing it ethical or safe? Examining the effects of executive military experience on earnings management

Purpose: This study aims to investigate whether and how the executive military experience influences accrual-based earnings management and real earnings management. Design/methodology/approach: Based on a sample of 4,392 listed firms in China between 2006 and 2022, this study examines the theoretical hypotheses by performing multiple regressions with fixed effects and a battery of robustness tests. Findings: With a focus on executives’ decisions on the choice between two earning management methods, this paper find military executives reduce accrual-based earnings management but increase real earnings management. The mechanism of risk-aversion is verified in the post hoc analysis. Originality/value: Most studies argue that military experience, which represents a strong sense of duty and self-discipline, can help to reduce corporate unethical behaviors. The study extends the existing literature on executives’ military experience by identifying risk-aversion rather than ethical values as the potential mechanism through which executives’ military experience affects earnings management.