Does Investor Protection Regime Affect the Effectiveness of Outside Directorship on the Board?
Journal of Multinational Financial Management, November 2012
Posted: 24 Jan 2013
Date Written: February 1, 2011
Since the Sarbanes-Oxley Act was enacted in U.S., there has been a general tendency to globally harmonize regulations and practices of board governance. The purpose of this study is to compare among countries how well the board of directors constrains earnings management. Using a sample of firms from 23 countries, we document some evidence that higher outside directorship on the board is associated with lower earnings management in the international context. We also find that there is no significant difference in the effectiveness of board outside directorship in constraining earnings management between high and low investor protection countries. Our findings mitigate a concern that harmonized corporate governance in low investor protection countries may not work.
Keywords: Sarbanes-Oxley, outside directorship, corporate governance
JEL Classification: G3, K2, M4
Suggested Citation: Suggested Citation