Do CEO social connections promote corporate malpractices? Evidence from classification shifting

This paper examines the effect of CEOs’ external social connections with other executives and directors on classification shifting, a widespread malpractice that inflates core earnings by altering presentation income statement line items without affecting bottom-line income. Using sample 995 UK listed firms in period 2005 to 2016 relying assumptions capital theory rent-extraction perspective, we find CEOs larger number are more likely engage shifting. Further results indicate this phenomenon occurs particularly when well-connected local and/or early years their service. Collectively, suggest promote corporate malpractices unlikely cause reputational losses. Overall, contribute literature providing evidence CEO is an important driver