We exploit a governance regulation enacted in Brazil to provide evidence on whether CEO non-duality influences earnings management. The natural experiment allows us to compare firms mandated to terminate CEO-chairman accumulation of positions with pre-mandate non-duality firms in a staggered difference-in-differences design. Employing recent developments in the methodology, our results show that treated firms reduced their discretionary accruals while keeping real activities unchanged, suggesting an improvement in financial reporting quality. Effects are concentrated in larger firms and those exhibiting higher ex ante levels of discretionary accruals. Our findings are policy-relevant as they underscore that a coercive CEO-chairman separation may emerge as a key mechanism in corporate governance, capable of mitigating agency conflicts by curbing CEO opportunistic behavior associated with earnings manipulation.
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