Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

Carcello, Joseph V.; Hollingsworth, Carl W.; Klein, April; Neal, Terry L.

doi:10.2139/ssrn.887512

Cited by 187 publications

(209 citation statements)

References 52 publications

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“…BoardMeet is the number of board meetings held annually by the board of directors. Prior studies assume that if a board meets more often it should have more time to discuss special issues and be more capable of controlling managers' discretionary behaviors (Carcello et al, 2006;Xie et al, 2003;Baxter et al, 2009). CMB principles require that the members of the board of directors cannot be assigned to more than two committees.…”

Section: Regression Resultsmentioning

confidence: 99%

“…Following prior research (Davidson et al, 2005;Baxter et al, 2009;Felo, Krishnamurthy, & Solieri, 2003;Xie et al, 2003), the current study measures audit committee size simply by the numbers of audit committee members. Again following prior studies (Chtourou & Bedard, 2001;Jeong & Rho, 2004;Davidson et al, 2005;Chen et al, 2005;Carcello et al, 2006;Piot & Janin, 2007;Baxter & Cotter, 2009;Chang & Sun, 2010), the current study uses Big4 as a control variable which takes the value of 1 if the firm is audited by one of the "big four" auditing firms, otherwise 0. The study controls for the effects of large block holders and measures ConcOwner as the percentage of shares held by the largest three substantial shareholders with more than 5 percent of the shares.…”

Section: Regression Resultsmentioning

confidence: 99%

“…Another control variable, Leverage, is measured as total debt divided by total assets. DeFond and Jiambalvo (1994) and Iatridis and Kadorinis (2009) provide evidence that managers manipulate earnings to avoid getting close to debt covenants, and this variable is widely used in EM studies (Peasnell et al, 1998;Klein, 2002;Park & Shin, 2004;Davidson et al, 2005;Chen et al, 2005;Carcello et al, 2006;Prawitt et al, 2009;Baxter et al, 2009;Chang & Sun, 2010). Matsumoto (2002) claims that managers of high-growth firms have major incentives to avoid missing earnings expectations, creating an extra incentive for them to manage earnings.…”

Section: Discretionary Accrualsmentioning

confidence: 99%

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Corporate Governance, Family Ownership and Earnings Management: Emerging Market Evidence

Adıgüzel

2013

AFR

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Earnings management (EM) is particularly important for family-firms which are exposed to more severe type-II agency conflicts between minority and majority shareholders than non-family firms. This study investigates the effectiveness of independent boards, audit committees and the presence of an internal audit function (IAF) in monitoring and controlling EM in family-owned firms. Overall, the results suggest that total accruals management is lower in family-owned than in non-family-owned firms, but that there is no difference in the direction of accruals. Family ownership is also found to reduce the monitoring effectiveness of independent boards and IAFs regarding earnings management.

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Section: Regression Resultsmentioning

confidence: 99%

Section: Regression Resultsmentioning

confidence: 99%

Section: Discretionary Accrualsmentioning

confidence: 99%

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Corporate Governance, Family Ownership and Earnings Management: Emerging Market Evidence

Adıgüzel

2013

AFR

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“…Carcello et al (2006) 283 firms traded on NYSE, Nasdaq's National Market and Nasdaq's Small Cap Market in the year 2003…”

Section: Earning Restatementsmentioning

confidence: 99%

Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

Lai

2014

SSRN Journal

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This thesis explores whether independent directors in the USA and Canada are effective in holding management accountable by: (1) analyzing how the policy of relying on independent directors developed and operates; (2) introducing the main theoretical critiques of independent directors' monitoring effect; and (3) examining whether empirical studies in the field of management science and financial economics support the policy in both countries of relying on independent directors as corporate monitors.Empirical evidence shows that boards with a majority of independent directors, in some circumstances, were associated with better firm performance (in the post-SOX period) and fulfilled certain board tasks effectively in the United States. Canadian studies, however, have not shown a positive association with improved firm performance. Audit committees composed entirely of independent directors have been effective in ensuring the quality of financial reporting in the United States, but this effect has not been found in Canada. Compensation committees composed fully of independent directors neither constrained the level of executive compensation nor tied CEO pay to firm performance in either country. US firms with an audit committee member who had accounting expertise, rather than financial analysis or supervisory expertise, were associated with a higher quality of financial reporting, while Canadian firms with an audit committee member who has financial expertise, instead of financial literacy, were associated with a similar effect. Studies also showed that independent directors perform better in certain circumstances.Based on empirical evidence, US regulators should consider: (1) changing the current mandatory requirements for an independent board and a completely independent compensation committee to a comply-or-explain requirement; (2) narrowing the qualification of a financial expert to an individual who has accounting expertise; and (3) recruiting independent directors who have two or fewer outside directorships, hold more of the corporation's shares, have lower cost of acquiring corporate information, and have no social connections with the CEO. In Canada, weak evidence of the monitoring effectiveness of independent directors supports the existing comply-or-explain approach. Canadian regulators may only need to require or recommend that at least one audit committee member has financial expertise, instead of only financial literacy.ii

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“…Apesar de diversos estudos -Carcello et al (2006), Cunha et al (2014), Klein (2002), Silva et al (2014), Sun, Lan e Liu (2014), Thiruvadi e Huang (2011), Xie, Davidson III e DaDalt (2003 e Yang e Krishnan (2005) -haverem constatado, em linhas gerais, uma correlação entre as características dos comitês de auditoria e a prática de gerenciamento de resultados, devido, especialmente, à eficácia do órgão no aumento da qualidade da informação financeira, este estudo se diferencia dos demais por investigar essa correlação em empresas que operam em setores regulados e empresas de setores não regulados (BAIOCO; ALMEIDA; .…”

Section: Introductionunclassified

Comitê de Auditoria e Gerenciamento de Resultados em Empresas Reguladas e Empresas Não Reguladas

Silva

Vasconcelos

Luca

2017

SCG

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ResumoOs diversos códigos de boas práticas de governança corporativa em todo o mundo recomendam a presença de órgãos técnicos, conhecidos como comitês, para assessorar o conselho de administração. Nesse contexto, destaca-se o comitê de auditoria, que deve ser constituído por membros independentes, com conhecimento na área, e tem, entre outras, a finalidade de inibir a prática de gerenciamento de resultados. O presente estudo analisa a correlação entre as características do comitê de auditoria e a prática de gerenciamento de resultados nas empresas listadas no IGCX, da BM&FBovespa. As 66 empresas do IGCX com comitê de auditoria foram distribuídas em dois grupos, sendo 30 reguladas e 36 não reguladas, levando em conta que as empresas participantes de setores regulados por agências governamentais seguem normas e diretrizes que as diferenciam das demais. Analisaram-se os dados, utilizando-se o teste de diferença entre médias, o teste de correlação e o método de detecção de interação automática do qui-quadrado (Chaid). Os resultados indicam que não há diferenças entre as características dos comitês de auditoria das empresas reguladas e as dos comitês das não reguladas. Constatouse, ainda, que não há correlação entre as características dos comitês de auditoria e as práticas de gerenciamento de resultados nas empresas da amostra. Contudo, conclui-se, por meio da análise da árvore de segmentação, que as empresas de grande porte apresentam baixo nível de gerenciamento de resultados, são reguladas e possuem pequeno número de membros independentes no comitê de auditoria.Palavras-chave: Comitê de auditoria. Gerenciamento de resultados. Empresas reguladas. Agências reguladoras.

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Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

Cited by 187 publications

References 52 publications

Corporate Governance, Family Ownership and Earnings Management: Emerging Market Evidence

Corporate Governance, Family Ownership and Earnings Management: Emerging Market Evidence

Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

Comitê de Auditoria e Gerenciamento de Resultados em Empresas Reguladas e Empresas Não Reguladas

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