Ethical Leadership Style & the Dark Personality Dimensions of Effective Person in Earnings Management

Background: Management personality is one of the critical factors influencing their behavior in performing earnings management (EM). As a result, the dark (negative) personality dimensions can play an effective role in earnings management. On the other hand, ethical leadership can act as a moderating factor; this research measures the effect of ethical leadership style on reducing dark personality dimensions (Machiavellianism, psychopathy, narcissism) of effective person in earnings management. Method: The present applied research uses descriptive-survey method and the correlation approach. The statistical population of this study is companies listed in the Tehran Stock Exchange (TSE) and Iran Fara Bourse (IFB) from 2011 to 2019 and based on some limitations 77 companies used in this research for testing the hypotheses. an‎d standard questionnaires of dark personality and ethical leadership and financial statement data have been used. Also, the multiple regression test and structural equations model used. the data were analyzed using R 3.1.2 and Lisrel 8.8 software. Results: The results show that most of the effective persons in earnings management are the CEOs of companies. The results also indicate a positive relationship between ethical leadership and dark personality dimensions (Machiavellianism, psychopathy, narcissism). Conclusion: The results indicate a positive relationship between ethical leadership and the dimensions of the dark personality; This is due to the closeness of dimension of "Narcissism" to the issues of intrinsic leadership, and on the other hand, this issue could be considered close to the perspective of the person involved in earnings management and supervisors and lack of belief in ethical supervision and leadership.