Is Corporate Board More Effective Under IFRS or 'It's Just an Illusion'?
Posted: 3 Jan 2014 Last revised: 14 Feb 2014
Date Written: January 2, 2014
The present study contends that the increased effectiveness of corporate boards’ in constraining earnings management around IFRS introduction might be “transitory” and fade away over time. Drawing on the attention based view (ABV) of the firm (Ocasio, 1997), we argue that the higher effectiveness of corporate boards might have been driven by a temporary higher level of attention which Independent Directors and Audit Committees allocated to accounting issues at the time of transition to IFRS. Our empirical results highlight that corporate board’s effectiveness reaches its peak around the adoption time, showing an “inverted U” path. This study contributes to the current debate on the extent to which additional contextual factors might prevail on accounting standard regulation – per se – in improving earnings quality. We further suggest that boards’ effectiveness in monitoring the corporate financial accounting process is contextually dependent.
Keywords: IFRS, Corporate board, Earnings management, ABV, Attention based view of the firm
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