The role of board independence in mitigating agency problem II in Australian family firms

Setia-Atmaja, Lukas; Haman, Janto; Tanewski, George

doi:10.1016/j.bar.2011.06.006

Cited by 74 publications

(54 citation statements)

References 69 publications

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“…Some findings support the importance of independent directors in, for example, disciplining poorly performing CEOs (Finkelstein & D'Aveni, 1994), protecting shareholder wealth (Byrd & Hickman, 1992) and ensuring corporate reporting quality (Beasley, 1996;Chahine & Filatotchev, 2011;Setia-Atmaja, Haman, & Tanewski, 2011). However, most studies find only a small, statistically insignificant link between independent directors and firm performance (e.g., Agrawal & Knoeber, 1996;Bhagat & Black, 2002;Vafeas & Theodorou, 1998).…”

Section: Independent Directors and Corporate Failurementioning

confidence: 96%

Board composition, grey directors and corporate failure in the UK

Hsu

2014

The British Accounting Review

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Additional information:Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. ABSTRACTThis study examines the effect of board composition on the likelihood of corporate failure in the UK. We consider both independent and non-independent (grey) non-executive directors (NEDs) to enhance our understanding of the impact of NEDs' personal or economic ties with the firm and its management on firm performance. We find that firms with a larger proportion of grey directors on their boards are less likely to fail. Furthermore, the probability of corporate failure is lower both when

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Section: Independent Directors and Corporate Failurementioning

confidence: 96%

Board composition, grey directors and corporate failure in the UK

Hsu

2014

The British Accounting Review

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“…The control variables include are firm size (FSIZE), market to book (MB) ratio, leverage (LEV), loss dummy (LOSS), firm age (FAGE) and lagged total accruals (LAGTACC). We follow previous studies and control for firm size by taking a natural log of book value of assets (see for example, Klein, 2002;Setia-Atmaja et al, 2011). Following previous studies, we take market-to-book ratio as one of our control variables measured as market value of equity divided by the book value of shareholders' equity (Klein, 2002).…”

Section: Model Specificationmentioning

confidence: 99%

Corporate social responsibility disclosures and earnings quality

Muttakin

Khan

Azim

2015

Managerial Auditing Journal

158

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Purpose -This paper aims to explore the relationship between corporate social responsibility (CSR) disclosures and earnings quality proxied by earnings accruals. Specifically, we examine whether CSR disclosures are context-specific, that is, whether companies dominated by powerful stakeholders are obliged to behave in a responsible manner to constrain earnings management, thereby reporting higher-quality earnings to investors. Design/methodology/approach -This paper explores the relationship between CSR disclosures and earnings quality proxied by earnings accruals. Specifically, we examine whether CSR disclosures are context-specific, that is, whether companies dominated by powerful stakeholders are obliged to behave in a responsible manner to constrain earnings management, thereby reporting higher-quality earnings to investors. Findings -Results show that managers in an emerging economy manage earnings when they provide more CSR disclosures. Such earnings management is achieved through income increasing discretionary accruals. Furthermore, companies from export-oriented industries dominated by powerful stakeholders (international buyers) disclosing more CSR activities, provide transparent financial reports through constraining earnings management. Originality/value -The findings of this study are significant for both investors and policymakers. Investors should not take for granted that firms engage in CSR activities, behave ethically and provide transparent financial reports. As we document that firms might manipulate earnings through discretionary accruals and provide less transparent financial reports to shareholders, the credibility of firms' CSR policies should be assessed with caution. Policies directing at promoting socially responsible practices instead of motivating the desired behaviour, may provide managers with additional incentives to utilise CSR for opportunistic behaviour. Thus, policymakers need to be cautious about this opportunistic behaviour and enhance monitoring to enforce social compliance. Possibly, some guidelines can be introduced to confirm that CSR disclosures are based on actual practice and not just a "green wash" statement to deceive stakeholders.

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“…Economies with weaker enforcement present the highest level of earnings management, concluding that earnings management tends to decrease as investor protection becomes stronger, which is in line with the results of Faccio et al (), who document earnings management in countries with lower investor protection. However, Setia‐Atmaja et al () find evidence of earnings management among Australian family firms, a common law country with high investor protection, like the US and the UK, but with an environment characterised by private benefits of control and high ownership concentration, which distinguishes Australia from the US and the UK.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Earnings Management in Public Family Firms under Economic Adversity

Vieira

2016

Australian Accounting Review

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This paper explores the relationship between the ownership of public firms and their motivation to implement earnings management practices, providing evidence on whether family businesses differ from non‐family businesses in terms of earnings management practices. In addition, it focuses on the possibility of asymmetrical earnings management policies between periods of stability and economic adversity. Based on a sample of Portuguese listed family‐controlled firms for the 1999–2011 period and using a panel data approach, we find no significant differences in the incentive to manage earnings between public family and non‐family firms, suggesting a compensation between the alignment hypothesis, the long‐term orientation of family firms and the desire to pass firms onto succeeding generations, and the entrenchment effect. The evidence shows that earnings management decreases with firms’ profitability, and non‐family firms’ discretionary accruals are mainly influenced by the board of directors. In crisis periods, the discretionary accruals of family firms are especially influenced by firm size. After controlling for different earnings management measures, the determinants of earnings management practices seem somewhat sensitive to the earnings quality proxies. The results provide evidence that directors and policy makers should prevent earnings management procedures in particular situations.

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The role of board independence in mitigating agency problem II in Australian family firms

Cited by 74 publications

References 69 publications

Board composition, grey directors and corporate failure in the UK

Board composition, grey directors and corporate failure in the UK

Corporate social responsibility disclosures and earnings quality

Earnings Management in Public Family Firms under Economic Adversity

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