IS CLASSIFIED BOARD THE WEAK CORPORATE GOVERNANCE? EVIDENCE FROM FINANCIAL RESTATEMENTS

Yin Liu ； Taewoo Kim ； Khondkar Karim

《Advances in Quantitative Analysis of Finance and Accounting》 14期 (2016/12) Pp. 141-169

https://doi.org/10.6293/AQAFA.2016.14.05

摘要

Prior literature suggests that classified boards may have the opposite impacts on financial restatements: some emphasize the exacerbating impact, while others advocate the mitigating impact. This study extends prior research by investigating whether classified boards exacerbate or mitigate restatements. Specifically, this study empirically examines the relation between the presence of classified boards and the incidence of financial restatement during the period 1998 to 2012 of publicly-traded and widely-held firms in United States. We find a strong negative association between classified boards and financial restatements. We also find evidence that classified boards are negatively related to financial misstatements with high-concern reasons (fraud, reserve estimation failures, and revenue recognition issues). Our results are robust to a number of sensitivity tests. Overall, this study casts doubt on the view of the exacerbating impact, while it supports the argument on the mitigating impact as shown by the reduction in the incidence of restatements in firms with classified boards.

關鍵字

Financial Restatements ； Corporate Governance ； Classified Board(s) ； Earnings Management

參考文獻

Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory, 23, 69-87

Agrawal, A., & Chadha, S. (2005). Corporate governance and accounting scandals. Journal of Law and Economics, 48, 371-406

Atanassov, J. (2006). Quiet life or managerial myopia: The impact of antitakeover legislation on technological innovation. Working Paper, University of Oregon, Eugene, OR.

Bar-Gill, O., & Bebchuk, L. A. (2003). Misreporting Corporate Performance. Working paper, Harvard Law School, Cambridge, MA.

Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review, 71, 443-465