Abstract

http://ssrn.com/abstract=1870373
 


 



CFO/CEO-Board Social Ties, Sarbanes Oxley, and Earnings Management


Gopal V. Krishnan


American University; American University - Kogod School of Business

K. K. Raman


University of Texas at San Antonio

Ke Yang


Lehigh University

Wei Yu


University of Tennessee

March 21, 2011

Accounting Horizons, Vol. 25, No. 3. pp. 537-557, September 2011

Abstract:     
Prior research suggests that the efficacy of a formally independent member of the board of directors could be undermined by social ties with the CEO. In this study, we examine the relation between CFO/CEO-board social ties and earnings management over the 2000-2007 time period. Our results suggest that CFO/CEOs picked more socially connected directors in the post-Sarbanes Oxley Act (SOX) time period (possibly as a way out of the mandated independence requirements). Our results also suggest a positive relation between CFO/CEO-board social ties and earnings management. Still, the increase in managerial/board risk aversion since SOX appears to have negated the effect of social ties on earnings management in the post-SOX period. Board independence and financial reporting quality remain topics of ongoing interest. The study is important in advancing our understanding of the role of social ties in earnings management.

Keywords: Social network, Earnings management, SOX, CEO, CFO

Accepted Paper Series





Not Available For Download

Date posted: June 24, 2011 ; Last revised: September 19, 2011

Suggested Citation

Krishnan, Gopal V. and Raman, K. K. and Yang, Ke and Yu, Wei, CFO/CEO-Board Social Ties, Sarbanes Oxley, and Earnings Management (March 21, 2011). Accounting Horizons, Vol. 25, No. 3. pp. 537-557, September 2011. Available at SSRN: http://ssrn.com/abstract=1870373

Contact Information

Gopal Krishnan (Contact Author)
American University ( email )
4400 Massachusetts Ave, NW
Washington, DC 20016
United States
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20016
United States
K. K. Raman
University of Texas at San Antonio ( email )
One UTSA Circle
San Antonio, TX 78249
United States
210-458-8749 (Phone)
Ke Yang
Lehigh University ( email )
621 Taylor Street
Bethlehem, PA 18015
United States
6107583684 (Phone)
6107586429 (Fax)
Wei Yu
University of Tennessee ( email )
640 Stokely Management Center
Department of Accounting and Info Management
Knoxville, TN 37996
United States
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