Board Interlocks and Earnings Management Contagion

• 成果类型: Article
• 署名作者: Chiu, Peng-Chia; Teoh, Siew Hong; Tian, Feng
• 署名单位: University of California System; University of California Irvine; University of Hong Kong
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50369
• 发表日期: 2013
• 页码: 915-944
• 关键词: market performance; RESTATEMENTS; SPREAD; errors; FRAUD

摘要

We test whether earnings management spreads between firms via shared directors. We find that a firm is more likely to manage earnings when it shares a common director with a firm that is currently managing earnings and is less likely to manage earnings when it shares a common director with a non-manipulator. Earnings management contagion is stronger when the shared director has a leadership or accounting-relevant position (e. g., audit committee chair or member) on its board or the contagious firm's board. Irregularity contagion is stronger than error contagion. The board contagion effect is robust to controlling for endogenous matching of firms with directors, fixed firm/director effects, incidence of M&A, industry, and contagion via a common auditor or geographical proximity. These findings support the view that board monitoring plays a key role in the contagion and quality of firms' financial reports.