Busy Boards and Corporate Earnings Management: An International Analysis
Review of Accounting and Finance. 18 (4), 533-556
42 Pages Posted: 17 May 2019 Last revised: 28 Sep 2020
Date Written: March 8, 2019
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: Suggested Citation