Busy Boards and Corporate Earnings Management: An International Analysis

Review of Accounting and Finance, Forthcoming

42 Pages Posted: 17 May 2019

See all articles by Stephen P. Ferris

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Min-Yu (Stella) Liao

Illinois State University - Department of Finance, Insurance and Law

Date Written: March 8, 2019

Abstract

Examining a set of firms from 46 countries, we explore whether busy independent directors, CEOs and audit committees effectively monitor corporate financial reporting. We find that firms with a higher proportion of busy independent directors or busy CEOs more extensively manage their earnings. Further, we discover that firms with a higher percentage of busy independent audit committee members have poorer financial reporting quality. This finding is consistent with the board and the audit committee monitoring the firm’s financial reporting while CEOs influence the reporting process itself. We determine that the adverse effect of board busyness on a firm’s earnings reporting quality is more pronounced in non-U.S. firms. We also discover that investor protection levels and national culture influence a firm’s earnings management.

Keywords: governance; boards; busy; audit; earnings management

JEL Classification: M41; M42; G3; G34

Suggested Citation

Ferris, Stephen P. and Liao, Min-Yu (Stella), Busy Boards and Corporate Earnings Management: An International Analysis (March 8, 2019). Review of Accounting and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3368365

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Min-Yu (Stella) Liao (Contact Author)

Illinois State University - Department of Finance, Insurance and Law ( email )

Normal, IL 61790
United States

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