The Relationship of CPA Gender with Overconfidence and Risk Propensity
Date Issued
2011
Date
2011
Author(s)
Tsao, Yun-Chieh
Abstract
This study starts from the view point of Behavioral Accounting, in order to examine whether the judgement and decision-making of an auditor when performing audit tasks would be effected by psychological effect, leading to behavioral bias. According to psychology literature, from outside the domains of auditing and accounting, researchers have frequently reported that males being more overconfident and more risk-seeking than females. Auditor overconfidence and risk-seeking may impair auditors’ independence, cause audits to be ineffective, and could lead to legal problem, inappropriate staffing, inefficient use of technology, and misallocation of audit resources, tending to overestimate the financial performance of their clients and underestimate the risk of financial misstatement. However, auditors are not a random sample of males and females, they are trained and expected to be professional, independent and rational, so findings from research conducted on males and females from outside the world of accounting cannot safely be assumed to apply for auditors.
In this paper, to examine if such a sex difference in overconfidence and risk propensity also exists within the auditor population, we use the data of earnings from financial report and the random walk model of earnings forecast to do the research. Besides, we use the forecast error ratio to measure the extent of overconfidence and risk-seeking. This study includes all TES-listed and OTC-listed companies in Taiwan from 1986 to 2009 in the sample.
The results show that in auditors’ population, males are more conservative, less risk-seeking and more pessimistic than females. In other words, females are more overconfident and risk-seeking than males, contrary to our expectations.
Subjects
overconfidence
risk-seeking
independence
sex difference
Type
thesis
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