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Financial reporting misconduct is a critical ethical concern that can undermine trust between corporate insiders and external stakeholders. This study integrates upper echelons theory and imprinting theory to examine the influence of executives' early-life disaster experiences on financial misreporting. We find that firms led by CEOs who have experienced early-life disasters have a higher likelihood of financial misreporting. Increased risk-taking serves as a potential mechanism through which disaster experience influences financial misreporting. Disaster-experienced CEOs exhibit higher levels of risk-taking, suggesting a greater tolerance for risk that may lead them to adopt more aggressive financial reporting positions and, consequently, a higher likelihood of misreporting. Governance mechanisms, including institutional ownership, board independence, and corporate governance, moderate this relationship. Our study contributes to the literature by shedding light on the impact of early-life disaster experiences on CEOs' risk perception, managerial styles, and propensity for engaging in risky reporting practices.
Pham et al. (Sat,) studied this question.