Journal ArticleDOI
The Audit Committee: Management Watchdog or Personal Friend of the CEO?
TLDR
This article found that firms whose audit committees have "friendship" ties to the CEO purchase fewer audit services and engage more in earnings management, and that auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present.Abstract:
To ensure that audit committees provide sufficient oversight over the auditing process and quality of financial reporting, legislators have imposed stricter requirements on the independence of audit committee members. Although many audit committees appear to be “fully” independent, anecdotal evidence suggests that CEOs often appoint directors from their social networks. Based on a 2004 to 2008 sample of U.S.-listed companies after the Sarbanes-Oxley Act we find that these social ties have a negative effect on variables that proxy for oversight quality. In particular, we find that firms whose audit committees have “friendship” ties to the CEO purchase fewer audit services and engage more in earnings management. Auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present. On the other hand, social ties formed through “advice networks” do not seem to hamper the quality of audit committee oversight.read more
Citations
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Journal ArticleDOI
Strangers on the board: The impact of board internationalization on earnings management of Nordic firms
Reggy Hooghiemstra,Niels Hermes,Niels Hermes,Lars Oxelheim,Lars Oxelheim,Lars Oxelheim,Trond Randøy +6 more
TL;DR: In this article, the authors investigate the consequences of board internationalization by drawing on research on language and board dynamics, and identify theory-based reasons why board internationalisation could increase, or decrease, earnings management practices.
Journal ArticleDOI
Audit committee gender diversity and financial reporting: evidence from restatements
Javad Oradi,Javad Izadi +1 more
TL;DR: In this article, the authors investigate the association between gender diversity on the audit committee and the incidence of financial restatements, and they find that the presence of at least one female member on audit committees reduces the likelihood of the occurrence of financial Restatements and that women perform better in a monitoring role, are more conservative and make more ethical decisions.
Journal ArticleDOI
Do Social Ties between External Auditors and Audit Committee Members Affect Audit Quality
TL;DR: In this article, the authors examine whether social ties between engagement auditors and audit committee members shape audit outcomes and find that the negative implications of these social ties may outweigh the benefits.
Journal ArticleDOI
Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?
TL;DR: In this article, the authors examined the impact of audit committee (AC) characteristics (e.g., size, female members, AC with multiple directorships, AC members with share ownership and AC with financial and supervisory expertise) on forward-looking disclosure (FLD) quality and quantity.
Journal ArticleDOI
Board Committees in Corporate Governance: A Cross‐Disciplinary Review and Agenda for the Future
TL;DR: A comprehensive review of the literature that summarizes and synthesizes antecedents and outcomes associated with board committees in publicly-traded firms in English common law countries is presented in this article.
References
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Book
Econometric Analysis of Cross Section and Panel Data
TL;DR: This is the essential companion to Jeffrey Wooldridge's widely-used graduate text Econometric Analysis of Cross Section and Panel Data (MIT Press, 2001).
Journal ArticleDOI
Birds of a Feather: Homophily in Social Networks
TL;DR: The homophily principle as mentioned in this paper states that similarity breeds connection, and that people's personal networks are homogeneous with regard to many sociodemographic, behavioral, and intrapersonal characteristics.
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The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors
TL;DR: In this article, the authors proposed a new measure of one aspect of the quality of accruals and earnings, which is the residual from firm-specific regressions of changes in working capital on past, present, and future operating cash flow realizations.
Posted Content
Regression standard errors in clustered samples
TL;DR: In this paper, the residuals are sorted and the observation is located in the residual corresponding to the quantile in question, taking into account weights if they are applied, and the square root of the sum of the weights is calculated.
Journal ArticleDOI
Methodological issues related to the estimation of financial distress prediction models
TL;DR: In this paper, the authors examined conceptually and empirically two estimation biases which can result when financial distress models are estimated on non-random samples and showed that these biases can result in biased parameter and probability estimates if appropriate estimation techniques are not used.