Auditor’s Responses to Size of Normal and Abnormal Foreign Exchange Gain or Losses: Evidence on Nature of Auditor’s Business Risks and Audit Process Risks*

The association between foreign directors and opportunistic financial reporting

“…Our research also supports the extant researches that suggest that board diversity has positive effect on the firm value and performance (Anderson et al, 2011;Carter et al, 2008;Jeon et al, 2017;Oxelheim & Randoy, 2003). Our results clearly show that foreign directors curb the opportunistic financial reporting behavior, and we argue that the inclusion of foreign directors could be the alternative way to enhance the corporate governance by improving the independence and the monitoring function of the board.…”

“…Most of the researches related to board diversity examine the effect of gender and ethnic diversity, but the researches on the effect of foreigners themselves on the functions of board-room have not been conducted sufficiently. Jeon et al (2017) analyzed the relationship between board diversity and earnings management. In particular, they used gender, former bureaucrats, and foreign director as proxies for the board diversity and examine the effect of diversity on the real earnings management.…”

“…However, there are not many researches that have been conducted on foreign directors due to the difficulty of collecting related data.IncludingOxelheim and Randoy (2003), many other researchers have conducted a study on the effect of foreign directors in the board, and they have found that the foreign directors in the board have positive effect on the firm value and the firm performance(Carter et al, 2003;Carter et al, 2008; Erhard et al, 2003;Jeon et al, 2017). Other studies(Byoun et al, 2016; Winfried et al, 2007) also offer that foreign directors increase the board diversity, and the diversity increases the independence of the board, which improves the monitoring function of the boardroom.…”