Director Connectedness: Monitoring Efficacy and Career Prospects

Journal of Financial and Quantitative Analysis, Forthcoming

68 Pages Posted: 16 Nov 2015 Last revised: 17 Dec 2017

See all articles by Vincent Intintoli

Vincent Intintoli

Clemson University, Department of Finance

Kathleen M. Kahle

University of Arizona - Department of Finance; European Corporate Governance Institute (ECGI)

Wanli Zhao

Renmin University of China

Date Written: December 15, 2017

Abstract

We examine a specific channel through which director connectedness may improve monitoring: financial reporting quality. We find that the connectedness of independent, non-co-opted audit committee members has a positive effect on financial reporting quality and accounting conservatism. The effect is not significant for non-audit committee or co-opted audit committee members. Our results are robust to tests designed to mitigate self-selection. Consistent with connected directors being valuable, the market reacts more negatively to the death of highly connected directors than less connected directors. Better connected directors also have better career prospects, suggesting that they have greater incentives to monitor.

Keywords: Centrality; Director connectedness; Director Turnover; Financial Reporting Quality; Audit Committee; Misconduct

JEL Classification: G30, J33, M52

Suggested Citation

Intintoli, Vincent and Kahle, Kathleen M. and Zhao, Wanli, Director Connectedness: Monitoring Efficacy and Career Prospects (December 15, 2017). Journal of Financial and Quantitative Analysis, Forthcoming , Available at SSRN: https://ssrn.com/abstract=2690920 or http://dx.doi.org/10.2139/ssrn.2690920

Vincent Intintoli

Clemson University, Department of Finance ( email )

Clemson, SC 29634
United States
864-656-2263 (Phone)

Kathleen M. Kahle (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Wanli Zhao

Renmin University of China ( email )

59 Zhongguancun Street
Beijing, 100872
China

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