Attention Please: Does Audit Committee Directors’ Unequal Allocation of Attention to Multiple Directorships Affect Firms’ Earnings Management?

Posted: 6 Dec 2018

See all articles by Henry He Huang

Henry He Huang

Yeshiva University - Sy Syms School of Business

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Chong Wang

The Hong Kong Polytechnic University

Jian Zhou

University of Hawaii at Manoa

Date Written: November 1, 2015

Abstract

We examine the relationship between audit committee directors’ unequal allocation of attention to multiple directorships and firms’ earnings management. We find that firms with a greater proportion of audit committee directors for whom the directorship is more important than their other directorships have lower abnormal accruals. These firms are also less likely to have securities litigation with GAAP violations, accounting restatements, and internal control weaknesses. Our study documents how audit committee directors’ unequal prioritization of their time and effort to different directorships affects the strength of accounting monitoring and thus highlights the importance of considering how much monitoring attention a firm would receive when hiring an audit committee director.

Keywords: multiple directorships, audit committees, earnings management

Suggested Citation

Huang, Henry and Lobo, Gerald J. and Wang, Chong and Zhou, Jian, Attention Please: Does Audit Committee Directors’ Unequal Allocation of Attention to Multiple Directorships Affect Firms’ Earnings Management? (November 1, 2015). Available at SSRN: https://ssrn.com/abstract=3281826

Henry Huang (Contact Author)

Yeshiva University - Sy Syms School of Business ( email )

New York, NY 10033
United States

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

Chong Wang

The Hong Kong Polytechnic University ( email )

Hong Kong
Hong Kong

Jian Zhou

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States

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