Board Structure Mandates: Consequences for Director Location and Financial Reporting

• 成果类型: Article
• 署名作者: Alam, Zinat S.; Chen, Mark A.; Ciccotello, Conrad S.; Ryan, Harley E., Jr.
• 署名单位: State University System of Florida; University of Central Florida; University System of Georgia; Georgia State University; University of Denver
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2736
• 发表日期: 2018
• 页码: 4735-4754
• 关键词: MANDATES; director location; Financial reporting

摘要

We examine how the director independence mandates of the Sarbanes-Oxley Act (SOX) and related reforms affected board geography and the quality of financial reporting. Using 1998-2006 data on the residential addresses of individual directors, we document that the geographic proximity to headquarters of audit committees and other monitoring committees declined upon implementation of the mandates. The decrease in proximity was especially large for those firms that were both SOX noncompliant and supply constrained in local director labor markets at the time the reforms were enacted. Moreover, firms with larger SOX-related losses of director proximity experienced significantly greater post-SOX declines in earnings quality. Our findings therefore suggest that, for some firms, the director independence mandates had unintended consequences for financial reporting quality.