Do Director Networks Matter for Financial Reporting Quality? Evidence from Audit Committee Connectedness and Restatements

• 成果类型: Article
• 署名作者: Omer, Thomas C.; Shelley, Marjorie K.; Tice, Frances M.
• 署名单位: University of Nebraska System; University of Nebraska Lincoln; University of Colorado System; University of Colorado Boulder
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3331
• 发表日期: 2020
• 页码: 3361-3388
• 关键词: Social networks; Boards of directors; Audit committee; corporate governance; financial reporting quality; RESTATEMENTS

摘要

This study examines the effect of audit committee connectedness through director networks on financial reporting quality, specifically the misstatement of annual financial statements. Using network analysis, we examine multiple dimensions of connectedness and find that after controlling for operating performance and corporate governance characteristics, firms with well-connected audit committees are less likely to misstate annual financial statements. In addition, our study demonstrates that audit committee connectedness through director networks moderates the negative effect of board interlocks to misstating firms on financial reporting quality. We conduct several tests to address identification concerns and find similar results. Our findings suggest that firms with better-connected audit committees are less likely to adopt reporting practices that reduce financial reporting quality.