The Relationship Between Directors' Independence, Reputation and Management Earnings Forecasts
36 Pages Posted: 20 Nov 2007 Last revised: 17 Feb 2008
Date Written: September 2007
We examine the relationship between corporate governance and management earnings forecasts. We extend the prior literature by examining the impact of independent director reputation on characteristics of management forecasts, by refining the previously used proxy for director independence and by distinguishing between routine and non-routine forecasts. We find a significant positive relationship between the likelihood and frequency of firms issuing management earnings forecasts and our measures of audit committee independence and independent director reputation but not board independence. However, there is some evidence that director independence is related to more specific forecasts. We also find that these results are driven by the routine earnings forecasts over which management have greater discretion.
Keywords: Management earnings forecasts, corporate governance, director reputation
JEL Classification: G34, M41, M45
Suggested Citation: Suggested Citation