The Initiation of Audit Committee Interlocks and the Contagion of Accounting Policy Choices: Evidence from Special Items

Review of Accounting Studies, 2020, 25(1), 120-158

52 Pages Posted: 3 Aug 2019 Last revised: 11 Apr 2021

See all articles by Ravi Dharwadkar

Ravi Dharwadkar

Syracuse University - Whitman School of Management

David G. Harris

Syracuse University - Joseph I. Lubin School of Accounting

Linna Shi

University of Cincinnati - Lindner College of Business

Nan Zhou

University of Cincinnati - Lindner College of Business

Date Written: October 21, 2019

Abstract

We document that the initiation of audit committee interlocks is associated with contagion in reported special items. We argue that this is, in part, attributable to contagion of accounting policy choices. We find that the special items of newly interlocked firms, unrelated before interlock, become positively correlated afterward, suggesting information transfer starts with interlock formation. This result holds for negative special items, key components of special items (asset impairments, restructuring costs, and gains/losses from asset sales), and is stronger for larger firms and for firms within the same industry.

Keywords: Audit committee interlock, Information transfer, Special items, Restructuring charges, SFAS 146

JEL Classification: M41, M42, M48, G34, D83

Suggested Citation

Dharwadkar, Ravi and Harris, David G. and Shi, Linna and Zhou, Nan, The Initiation of Audit Committee Interlocks and the Contagion of Accounting Policy Choices: Evidence from Special Items (October 21, 2019). Review of Accounting Studies, 2020, 25(1), 120-158, Available at SSRN: https://ssrn.com/abstract=3427589 or http://dx.doi.org/10.2139/ssrn.3427589

Ravi Dharwadkar

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

David G. Harris

Syracuse University - Joseph I. Lubin School of Accounting ( email )

Whitman School of Management
721 University Ave
Syracuse, NY 13244-2130
United States
315-443-3362 (Phone)
315-443-5457 (Fax)

Linna Shi (Contact Author)

University of Cincinnati - Lindner College of Business ( email )

P.O. Box 210211
Cincinnati, OH 45221-0211
United States
(513) 556-2097 (Phone)

Nan Zhou

University of Cincinnati - Lindner College of Business ( email )

P.O. Box 210211
Cincinnati, OH 45221-0211
United States

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

Paper statistics

Downloads
59
Abstract Views
691
rank
451,133
PlumX Metrics