دانشگاه اصفهان نشریه پژوهش های حسابداری مالی 2322-3405 17 1 2025 05 22 CEO Power and Reclassification-Based Earnings Management Across Corporate Life Cycle Stages قدرت مدیرعامل و تغییر طبقه‌بندی در راستای مدیریت سود در مراحل چرخۀ عمر شرکت 63 94 29866 10.22108/far.2025.144652.2117 FA مهدی کاظمی علوم استادیار، گروه حسابداری، دانشکدۀ علوم اقتصادی و اجتماعی، دانشگاه بوعلی سینا، همدان، ایران. محسن ختن‌لو استادیار، گروه حسابداری، دانشکدۀ علوم اقتصادی و اجتماعی، دانشگاه بوعلی سینا، همدان، ایران. هانیه فارسی مودب کارشناس ارشد، گروه حسابداری، مؤسسۀ آموزش عالی الوند، همدان، ایران. Journal Article 2025 03 12 CEO power plays a crucial role in a company's decision-making processes and can influence the use of classification shifting as a method of earnings management. This study examines the relationship between CEO power and earnings management through classification shifting, with a particular focus on how the various stages of the corporate life cycle moderate this relationship. Data were collected from 151 companies listed on the Tehran Stock Exchange between 2011 and 2023, and the research hypotheses were tested using multiple regression analysis. The findings indicate that higher CEO power is associated with a reduction in earnings management through classification shifting of income statement items. Additionally, the results show that the introduction and growth stages of the corporate life cycle weaken the relationship between CEO power and classification shifting, whereas the decline stage strengthens this relationship. The study found no statistically significant results regarding the moderating role of the maturity stage in the relationship between CEO power and classification shifting. Overall, the results suggest that CEOs in the introduction and growth stages aim to genuinely enhance their firms' positions and align their power with corporate objectives. Conversely, during the decline stage, CEOs are more likely to engage in operational earnings management through classification shifting to present a more favorable image of the company. By highlighting the connections between CEO power, classification shifting, and the moderating influence of life cycle stages, this study contributes to the theoretical understanding of corporate governance and financial reporting, providing valuable insights for investors and market regulators in assessing the risks associated with earnings management across firms. <strong>Introduction</strong> The earnings management literature has primarily focused on accrual-based earnings management (Dechow et al., 2010) and real activities manipulation (Roychowdhury, 2006). However, classification shifting—a relatively less-explored yet widely practiced method—has attracted increasing attention due to its indirect nature and difficulty of detection by auditors and investors (McVay, 2006). This technique enables managers to influence investors' perceptions of operating performance by adjusting items between the operating and non-operating sections of the income statement (Abernathy et al., 2014). Classification shifting is typically used when other methods, such as accruals or real activities manipulation, are costly or practically constrained. Due to its minimal impact on net income and perceived low risk, this approach is considered an opportunistic tool (Nagar & Sen, 2017). One critical factor that can either facilitate or constrain such opportunistic behaviors is the power of the CEO within the corporate governance structure. Powerful CEOs—through concentrated authority, political connections, institutional influence, or diminished board oversight—may enjoy greater autonomy in executing earnings management strategies (Roy et al., 2024). Prior studies on the relationship between CEO power and earnings management have yielded conflicting results. Some research indicates that increased CEO power is associated with more earnings management (Ali & Zhang, 2015; Li et al., 2021), while others report a negative relationship, suggesting that powerful CEOs may reduce earnings management by mitigating agency costs and information asymmetry due to their independence and enhanced board oversight (Baker et al., 2019; Motamedi et al., 2022). A key explanatory factor for these contradictions may lie in the firm's life cycle stage—a structural variable that affects operational conditions, managerial incentives, and financing needs (Adiwibowo & Nurmala, 2023). Firms at different life cycle stages (introduction, growth, maturity, and decline) face distinct challenges and opportunities that can alter managers' propensity to engage in classification shifting (Xie et al., 2022). For instance, growth-stage firms are generally less inclined toward earnings management (Xie et al., 2022), while firms in the introduction and decline stages may have stronger incentives to manipulate earnings (Nagar & Radhakrishnan, 2017). This study is significant as it examines the impact of CEO power on earnings management through classification shifting, with a particular focus on the moderating role of the firm life cycle. In the Iranian context, where CEOs often possess unique characteristics such as political affiliations, institutional ties, or extensive experience, investigating this relationship is particularly relevant. Although prior Iranian studies (e.g., Imeni & Moshashaei, 2022; Saghafi & Jamalianpour, 2018) have confirmed the use of classification shifting, they have largely overlooked the influence of CEO power. Exploring this relationship across different life cycle stages can provide deeper insights into managerial behavior and help investors better forecast firms' prospects. Based on the theoretical foundation and prior research, the following hypotheses are formulated: H1: CEO power has a significant effect on earnings management through classification shifting. H2: The introduction stage of the firm life-cycle weakens the relationship between CEO power and earnings management through classification shifting. H3: The growth stage of the firm life-cycle weakens the relationship between CEO power and earnings management through classification shifting. H4: The maturity stage of the firm life-cycle weakens the relationship between CEO power and earnings management through classification shifting. H5: The decline stage of the firm life-cycle strengthens the relationship between CEO power and earnings management through classification shifting.   <strong>Methods & Material</strong> The statistical population of the study includes all firms listed on the Tehran Stock Exchange from 2011 to 2023 (1390–1402 in the Iranian calendar) that met the following criteria: fiscal year ending in March, no changes in fiscal year during the study period, non-financial intermediary industries (e.g., excluding banks, insurance, investment companies), and availability of the required data for variable computation. A total of 151 firms formed a balanced panel of 1,963 firm-year observations. The data used for computing the variables were extracted from financial statements, accompanying notes, and supplementary disclosures, and analyzed using EViews software.   <strong>Funding</strong> The statistical results revealed a significant negative relationship between CEO power and classification shifting, indicating that increased CEO power is associated with a reduction in earnings management through classification shifting. Moreover, Hypotheses 2 through 5 explored the moderating effects of the firm's life cycle stages (introduction, growth, maturity, and decline) on this relationship. The results indicated that the introduction and growth stages significantly weaken the relationship between CEO power and classification shifting, while the maturity stage does not exhibit a significant moderating effect. In contrast, the decline stage significantly strengthens this relationship.   <strong>Conclusion & Results</strong> The findings suggest that CEO power has a significant and negative impact on classification shifting, such that stronger CEO power is associated with a decrease in this form of earnings management. This result aligns with the findings of Aflatooni et al. (2023) and Motamedi et al. (2022). However, this contrasts with the findings of Arif et al. (2023) and Adiwibowo and Nurmala (2023), who reported no significant relationship. Differences in the definition of CEO power, such as tenure in this study versus financial expertise or board membership in others, may account for these discrepancies. Additionally, the introduction and growth stages of the firm's life cycle weaken the relationship between CEO power and classification shifting. In contrast, the maturity stage does not show a significant effect, and the decline stage strengthens the relationship. These results are consistent with the findings of Adiwibowo and Nurmala (2023), Nagar and Sen (2017), and Hussain et al. (2020). In the introduction and growth stages, firms tend to focus on market positioning and genuine expansion, reducing the need for earnings management. In contrast, during the decline stage, competitive pressure and falling sales may motivate managers to use classification shifting to obscure operating losses. Investors should consider CEO characteristics (e.g., tenure, political ties, ownership) and the firm's life cycle stage, as these factors influence the quality of financial reporting. Future research could investigate the impact of CEO financial expertise, audit quality, governance mechanisms, and organizational culture on classification shifting, particularly within the context of the firm's life cycle.   قدرت مدیرعامل، به عنوان یکی از ارکان کلیدی در فرایند تصمیم‌گیری عملیاتی شرکت، می‌تواند بر استفاده از تغییر طبقه‌بندی برای مدیریت سود اثرگذار باشد. پژوهش حاضر با هدف بررسی رابطۀ بین قدرت مدیرعامل و مدیریت سود از طریق تغییر طبقه‌بندی با تأکید بر نقش تعدیلی مراحل چرخۀ عمر شرکت انجام شده است. در این راستا، داده‌های 151 شرکت پذیرفته‌شده در بورس اوراق بهادار تهران در بازۀ زمانی 1390 تا 1402 استخراج و فرضیه‌های پژوهش با رگرسیون چندگانه آزمون شدند. یافته‌های پژوهش نشان داد با افزایش قدرت مدیرعامل، اعمال مدیریت سود از طریق تغییر طبقه‌بندی اقلام در صورت سود و زیان کاهش می‌یابد. افزون بر این، نتایج نشان داد دو مرحلۀ تولد و رشد چرخۀ عمر نقش تعدیلی تضعیف‌کننده در رابطۀ بین قدرت مدیرعامل و تغییر طبقه‌بندی دارند؛ در حالی که مرحلۀ افول چرخۀ عمر نقش تعدیلی تقویت‌کننده در رابطۀ بین قدرت مدیرعامل و تغییر طبقه‌بندی دارد. نتایج دربارۀ نقش تعدیلی مرحلۀ بلوغ در رابطۀ بین قدرت مدیرعامل و تغییر طبقه‌بندی از نظر آماری معنادار نبوده است. یافته‌های پژوهش حاکی از آن است که مدیران‌عامل در مرحلۀ تولد و رشد به دنبال ارتقای واقعی جایگاه شرکت هستند و از قدرت، هم‌راستا با اهداف شرکت استفاده می‌کنند؛ اما در مرحلۀ افول، به منظور نمایش بهتر وضعیت شرکت، اقدام به مدیریت سود عملیاتی از طریق تغییر طبقه‌بندی می‌کنند. این پژوهش با نشان‌دادن رابطۀ قدرت مدیرعامل با تغییر طبقه‌بندی و نقش تعدیلی مراحل چرخۀ عمر، به درک نظری از حاکمیت شرکتی و گزارشگری مالی کمک می‌کند و برای سرمایه‌گذاران و ناظران بازار، ارزیابی بهتر ریسک‌های مدیریت سود در شرکت‌های مختلف را ممکن می‌کند.   https://far.ui.ac.ir/article_29866_987410ee6cbb7f3a4da3be5f30514981.pdf