The Effect of Distracted Audit Committee Members on Earnings Quality

38 Pages Posted: 11 Nov 2019

See all articles by Susan Elkinawy

Susan Elkinawy

Loyola Marymount University - Department of Finance and Computer Information Systems

Joshua D. Spizman

Loyola Marymount University - Department of Finance

Hai Tran

Loyola Marymount University - Department of Finance and Computer Information Systems

Date Written: July 8, 2019

Abstract

In this paper, we examine the impact of distracting events to audit committee members on the firms’ earnings quality. Specifically, we focus on major events occurring simultaneously at other firms in which the audit committee members also serve as board members or CEOs. We find that during the years of major events, the number of board meetings at event firms significantly increases while there is no difference in board meetings at non-event firms. During this period, distracted directors miss more board meetings at the non-event firms than non-distracted directors. Consequently, firms with more distracted audit committee members have lower earnings quality. Notably, the observed decline in earnings quality at non-event firms is confined to the distraction years and audit committee members only.

Keywords: busy directors, distracted directors, director attention, corporate governance, earnings quality

JEL Classification: G30, G34

Suggested Citation

Elkinawy, Susan and Spizman, Joshua D. and Tran, Hai, The Effect of Distracted Audit Committee Members on Earnings Quality (July 8, 2019). Available at SSRN: https://ssrn.com/abstract=3478902 or http://dx.doi.org/10.2139/ssrn.3478902

Susan Elkinawy

Loyola Marymount University - Department of Finance and Computer Information Systems ( email )

Los Angeles, CA 90045
United States

Joshua D. Spizman

Loyola Marymount University - Department of Finance ( email )

Los Angeles, CA 90045
United States
(310) 338-2902 (Phone)

HOME PAGE: http://www.joshuaspizman.com

Hai Tran (Contact Author)

Loyola Marymount University - Department of Finance and Computer Information Systems ( email )

Los Angeles, CA 90045
United States
3103387409 (Phone)

HOME PAGE: http://www.haitranv.com

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