Board Characteristics, Accounting Report Integrity, and the Cost of Debt

Posted: 16 Apr 2004

See all articles by Ronald C. Anderson

Ronald C. Anderson

Temple University - Department of Finance

Sattar Mansi

Virginia Polytechnic Institute & State University

David M. Reeb

National University of Singapore

Multiple version iconThere are 2 versions of this paper

Abstract

Creditor reliance on accounting-based debt covenants suggests that debtors are potentially concerned with board of director characteristics that influence the integrity of financial accounting reports. In a sample of S&P 500 firms, we find that the cost of debt is inversely related to board independence and board size. We also find that fully independent audit committees are associated with a significantly lower cost of debt financing. Similarly, yield spreads are also negatively related to audit committee size and meeting frequency. Overall, these results provide market-based evidence that boards and audit committees are important elements affecting the reliability of financial reports.

Keywords: Audit committee composition, board composition, corporate governance, financial statements, accounting information

JEL Classification: M41, M49, K22, G32, G34

Suggested Citation

Anderson, Ronald Craig and Mansi, Sattar and Reeb, David M., Board Characteristics, Accounting Report Integrity, and the Cost of Debt. Journal of Accounting & Economics, 2004. Available at SSRN: https://ssrn.com/abstract=530842

Ronald Craig Anderson

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

Sattar Mansi (Contact Author)

Virginia Polytechnic Institute & State University ( email )

David M. Reeb

National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://www.davidreeb.net

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