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Non-Traditional Director Departure and Earning Management

Anh Do Orcid Logo, Dimitrios Gounopoulos, David Newton

SSRN Electronic Journal

Swansea University Author: Anh Do Orcid Logo

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DOI (Published version): 10.2139/ssrn.4766517

Abstract

It is hypothesized that the practice of earnings management is systematically related to the strength of internal corporate governance mechanisms, including the board of directors, the audit committee, the internal audit function and the choice of the external auditor. However, the role of non-tradi...

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Published in: SSRN Electronic Journal
ISSN: 1556-5068
Published: Elsevier BV
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URI: https://cronfa.swan.ac.uk/Record/cronfa67505
first_indexed 2024-09-30T16:48:46Z
last_indexed 2024-11-25T14:20:18Z
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recordtype SURis
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spelling 2024-09-30T17:49:30.2139150 v2 67505 2024-08-30 Non-Traditional Director Departure and Earning Management a1cf2469f07a784a37b1739eed708f6c 0000-0002-4537-0035 Anh Do Anh Do true false 2024-08-30 CBAE It is hypothesized that the practice of earnings management is systematically related to the strength of internal corporate governance mechanisms, including the board of directors, the audit committee, the internal audit function and the choice of the external auditor. However, the role of non-traditional directors has not yet been positioned in the determinants of earnings management literature. This study aims to fill in the gap of effects of corporate governance toward earning managements regarding the non-traditional director character. Using panel data on U.S public firms, we document a negative effect of non-traditional director departure on earning management. We establish causality of non-traditional director departure on earnings management and real earning management using difference-in-difference approach that exploits an exogenous shock to board composition, namely, the mandate of a majority of outside directors on company boards by NYSE and NASDAQ in response to the passage of Sarbanes-Oxley Act in 2002. Journal Article SSRN Electronic Journal Elsevier BV 1556-5068 0 0 0 0001-01-01 10.2139/ssrn.4766517 Preprint article before certification by peer review. COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2024-09-30T17:49:30.2139150 2024-08-30T14:40:58.3389514 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Anh Do 0000-0002-4537-0035 1 Dimitrios Gounopoulos 2 David Newton 3
title Non-Traditional Director Departure and Earning Management
spellingShingle Non-Traditional Director Departure and Earning Management
Anh Do
title_short Non-Traditional Director Departure and Earning Management
title_full Non-Traditional Director Departure and Earning Management
title_fullStr Non-Traditional Director Departure and Earning Management
title_full_unstemmed Non-Traditional Director Departure and Earning Management
title_sort Non-Traditional Director Departure and Earning Management
author_id_str_mv a1cf2469f07a784a37b1739eed708f6c
author_id_fullname_str_mv a1cf2469f07a784a37b1739eed708f6c_***_Anh Do
author Anh Do
author2 Anh Do
Dimitrios Gounopoulos
David Newton
format Journal article
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institution Swansea University
issn 1556-5068
doi_str_mv 10.2139/ssrn.4766517
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
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description It is hypothesized that the practice of earnings management is systematically related to the strength of internal corporate governance mechanisms, including the board of directors, the audit committee, the internal audit function and the choice of the external auditor. However, the role of non-traditional directors has not yet been positioned in the determinants of earnings management literature. This study aims to fill in the gap of effects of corporate governance toward earning managements regarding the non-traditional director character. Using panel data on U.S public firms, we document a negative effect of non-traditional director departure on earning management. We establish causality of non-traditional director departure on earnings management and real earning management using difference-in-difference approach that exploits an exogenous shock to board composition, namely, the mandate of a majority of outside directors on company boards by NYSE and NASDAQ in response to the passage of Sarbanes-Oxley Act in 2002.
published_date 0001-01-01T08:33:28Z
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