Abstract

http://ssrn.com/abstract=246674
 
 

References (62)



 
 

Citations (419)



 


 



Audit Committee, Board of Director Characteristics, and Earnings Management


April Klein


New York University (NYU) - Department of Accounting, Taxation & Business Law

October 2006

NYU, Law and Economics Research Paper No. 06-42

Abstract:     
This study examines whether audit committee and board characteristics are related to earnings management by the firm. The motivation behind this study is the implicit assertion by the SEC, the NYSE and the NASDAQ that earnings management and poor corporate governance mechanisms are positively related.

A non-linear negative relation is found between audit committee independence and earnings manipulation. Specifically, a significant relation is found only when the audit committee has less than a majority of independent directors. Surprisingly, and in contrast to the new regulations, no significant association is found between earnings management and the more stringent requirement of 100% audit committee independence.

Empirical evidence also is provided that other corporate governance characteristics are related to earnings management. Earnings management is positively related to whether the CEO sits on the board's compensation committee. It is negatively related to the CEO's shareholdings and to whether a large outside shareholder sits on the board's audit committee. These results suggest that boards structured to be more independent of the CEO may be more effective in monitoring the corporate financial accounting process.

Number of Pages in PDF File: 42

Keywords: Audit committees, Earnings management, Corporate governance, Board of Directors

JEL Classification: G38, K22, M41, M43, M49

working papers series


Download This Paper

Date posted: November 22, 2000  

Suggested Citation

Klein, April, Audit Committee, Board of Director Characteristics, and Earnings Management (October 2006). NYU, Law and Economics Research Paper No. 06-42. Available at SSRN: http://ssrn.com/abstract=246674 or http://dx.doi.org/10.2139/ssrn.246674

Contact Information

April Klein (Contact Author)
New York University (NYU) - Department of Accounting, Taxation & Business Law ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012
United States
Feedback to SSRN


Paper statistics
Abstract Views: 28,930
Downloads: 9,794
Download Rank: 175
References:  62
Citations:  419

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.422 seconds