The moderating effect of CEO profile on the link between cutting R&D expenditures and targeting to meet/beat earnings benchmarks

“Anybody can manage short, anybody can manage long, balancing those two things is what management is” (Jack Welch, Ex General Electric CEO). Drawing from a broad theoretical base, this article emphasizes the relationship of CEO traits with real-based earnings management through discretionary R&D expenses and targeting to meet or just beat earnings benchmarks. The analysis is based on a sample of European firms listed on Stoxx Europe 600 index spanning the years 2000-2014. Evidence reveals that (i) achieving earnings targets, (ii) CEO overconfidence, (iii) CEO tenure, (iv) CEO age, and (v) CEO education are significantly associated with cutting R&D expenditures. Findings suggest also that (vi) when firms use abnormal discretionary expenditure as method of earnings management to meet/beat earnings benchmarks, the CEO profile is a moderator variable in a such relation.