The Impact of Board Internationalization on Earnings Management

IFN Working Paper No. 1096

Strangers on the board: The impact of board internationalization on earnings management of Nordic firms, International Business Review 28 (2019), 119-134.

39 Pages Posted: 14 Jan 2016 Last revised: 7 Dec 2018

See all articles by Reggy Hooghiemstra

Reggy Hooghiemstra

University of Groningen - Faculty of Economics and Business

Niels Hermes

University of Groningen - Faculty of Economics and Business

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Lund University

Trond Randøy

University of Agder - School of Management

Date Written: January 12, 2016

Abstract

Prior literature shows that choices regarding board composition are associated with earnings management. We add to this literature by examining the effects of the presence of a foreign board member on earnings management. Using a sample of 3,249 firm-year observations representing 586 non-financial listed Nordic firms during 2001-2008, we find that the presence of a non-Nordic, foreign director is associated with significantly higher levels of earnings management. Moreover, we provide preliminary evidence that differences in accounting knowledge drive this effect. Our results suggest that it may not necessarily be beneficial to appoint a foreign director to the board.

Keywords: Earnings management; Board composition; Internationalization; Foreign board member; Accounting knowledge

JEL Classification: G34; M16; M41; M52

Suggested Citation

Hooghiemstra, Reggy and Hermes, Niels and Oxelheim, Lars and Randøy, Trond, The Impact of Board Internationalization on Earnings Management (January 12, 2016). IFN Working Paper No. 1096, Strangers on the board: The impact of board internationalization on earnings management of Nordic firms, International Business Review 28 (2019), 119-134., Available at SSRN: https://ssrn.com/abstract=2714428 or http://dx.doi.org/10.2139/ssrn.2714428

Reggy Hooghiemstra

University of Groningen - Faculty of Economics and Business ( email )

Department of Auditing
P.O. Box 800
9700 AH Groningen
Netherlands
31 50 363 3768 (Phone)
31 50 363 7174 (Fax)

Niels Hermes

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
Sweden
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

Trond Randøy

University of Agder - School of Management ( email )

Adger Research Foundation
Serviceboks 422 Bygg H
N-4604 Kristiansand
Norway
47 3814 1027 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
341
Abstract Views
2,504
Rank
182,996
PlumX Metrics