Board Composition and Accounting Conservatism: The Role of Business Experts, Support Specialist and Community Influentials

  1. Enache, Luminita 2
  2. García‐Meca, Emma 1
  1. 1 Technical University of Cartagena
  2. 2 University of Calgary
    info

    University of Calgary

    Calgary, Canadá

    ROR https://ror.org/03yjb2x39

Revista:
Australian Accounting Review

ISSN: 1035-6908,  1835-2561

Año de publicación: 2018

Volumen: 29

Número: 1

Páginas: 252-265

Tipo: Artículo

DOI: 10.1111/AUAR.12279 GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Australian Accounting Review

Resumen

In this study, we examine the relationship between accounting conservatism and board composition. We categorise outside directors according to their skills, abilities, connections and knowledge in three different categories: business experts, support specialists and community influentials. We address three main questions: Is the financial and accounting expertise of directors relevant to improving accounting conservatism? Does specialised expertise in the board affect the speed at which news is reflected in earnings? And how do the political ties of directors affect the sensitivity of earnings to bad news? Our sample consists of active US biotech firms publicly traded on the NYSE, AMEX and NASDAQ stock exchanges during the 2005–2013 period. Our study confirms that not all outside directors are equally effective in monitoring and contracting and that certain kinds of outside directors, such as politicians, can even lower the sensitivity of earnings to bad news. Our robustness analysis confirms that these results are not conditional on the accounting measure, and suggest that distinguishing directors according to their skills and abilities is crucial to understanding the way in which firm boards affect conservatism.

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