Do Outside Directors and Their Financial Expertise Matter in Earnings Quality?

The Journal of Management Accounting, Japan Supplement 2, December, 2013 pp. 31-64

34 Pages Posted: 9 Oct 2019

See all articles by Takashi Ebihara

Takashi Ebihara

Musashi University - Faculty of Economics

Roshan Ajward

University of Sri Jayewardenepura

Date Written: December 30, 2013

Abstract

Using 2006 to 2008 data from all firms listed on Japanese stock exchanges, we examine the relationships among the presence of outside directors, their financial expertise, and their companies' earnings quality. Contrary to expectations, the multivariate regression analyses indicate no significant positive relationship among these components. Firms with lower-quality earnings tend to engage more outside directors than firms with higher-quality earnings. However, the longer the tenure that outside directors have with the firm, the higher earnings quality tends to be. Furthermore, additional tests indicate that the presence of inside directors and inside board auditors is positively associated with earnings quality, but the mere presence of outside
directors or outside board auditors is not associated with earnings quality.

Keywords: outside directors, financial expertise, corporate governance, board systems, earnings quality

Suggested Citation

Ebihara, Takashi and Ajward, Roshan, Do Outside Directors and Their Financial Expertise Matter in Earnings Quality? (December 30, 2013). The Journal of Management Accounting, Japan Supplement 2, December, 2013 pp. 31-64, Available at SSRN: https://ssrn.com/abstract=3461068 or http://dx.doi.org/10.2139/ssrn.3461068

Takashi Ebihara

Musashi University - Faculty of Economics ( email )

1-26-1 Toyotama-kami
Nerima-ku
Tokyo 176
Japan
81-3-5986-3838 (Phone)

HOME PAGE: http://www.musashi.ac.jp/modules/gakubu_economics/index.php?content_id=62

Roshan Ajward (Contact Author)

University of Sri Jayewardenepura ( email )

Nugegoda
Gandodawila
Gangodawila, Nugegoda 10250
Sri Lanka
0714837303 (Phone)
10250 (Fax)

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