Abstract

http://ssrn.com/abstract=595138
 
 

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Corporate Governance and Accounting Scandals


Anup Agrawal


University of Alabama - Culverhouse College of Commerce & Business Administration

Sahiba Chadha


University of Alabama - Culverhouse College of Commerce & Business Administration

September 2004

AFA 2004 San Diego Meetings

Abstract:     
This paper empirically examines whether certain corporate governance mechanisms are related to the probability of a company restating its earnings. We examine a sample of 159 U.S. public companies that restated earnings and an industry-size matched sample of control firms. We have assembled a novel, hand-collected dataset measuring corporate governance characteristics of these 318 firms. We find that several key governance characteristics are unrelated to the probability of a company restating earnings. These include the independence of boards and audit committees, and the provision of non-audit services by outside auditors. We find that the probability of restatement is lower in companies whose boards or audit committees have an independent director with financial expertise; it is higher in companies where the CEO belongs to the founding family. These relations are statistically significant, large in magnitude, and robust to alternative specifications. Our findings are consistent with the idea that independent directors with financial expertise are valuable in providing oversight of a firm's financial reporting practices.

Number of Pages in PDF File: 47

Keywords: Corporate governance, Accounting scandals, Earnings restatements, Financial scandals, Sarbanes-Oxley Act, Boards of directors

JEL Classification: G34, G38, K22, L51, M41

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Date posted: January 17, 2003  

Suggested Citation

Agrawal, Anup and Chadha, Sahiba, Corporate Governance and Accounting Scandals (September 2004). AFA 2004 San Diego Meetings. Available at SSRN: http://ssrn.com/abstract=595138 or http://dx.doi.org/10.2139/ssrn.595138

Contact Information

Anup Agrawal (Contact Author)
University of Alabama - Culverhouse College of Commerce & Business Administration ( email )
Culverhouse College of Business
EFLS, Box 870224
Tuscaloosa, AL 35487-0223
United States
205-348-8970 (Phone)
205-348-0590 (Fax)
HOME PAGE: http://old.cba.ua.edu/personnel/AnupAgrawal.html
Sahiba Chadha
University of Alabama - Culverhouse College of Commerce & Business Administration ( email )
Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8966 (Phone)
205-348-0590 (Fax)
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