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- Title
CFO/CEO-Board Social Ties, Sarbanes- Oxley, and Earnings Management.
- Authors
Krishnan, Gopal V.; Raman, K. K.; Ke Yang; Wei Yu
- Abstract
Prior research suggests that the efficacy of a formally independent member of the board of directors could be undermined by social ties with the CEO. In this study, we examine the relation between CFO/CEO-board social ties and earnings management over the 2000-2007 time period. Our results suggest that CFOs/CEOs picked more socially connected directors in the post-Sarbanes-Oxley Act (SOX) time period (possibly as a way out of the mandated independence requirements). Our results also suggest a positive relation between CFO/CEO-board social ties and earnings management. Still, the increase in managerial/board risk aversion since SOX appears to have negated the effect of social ties on earnings management in the post-SOX period. Board independence and financial reporting quality remain topics of ongoing interest. The study is important in advancing our understanding of the role of social ties in earnings management.
- Subjects
UNITED States; EARNINGS management; CORPORATE profits; FINANCIAL management; FINANCIAL statements; UNITED States. Sarbanes-Oxley Act of 2002; MANAGEMENT
- Publication
Accounting Horizons, 2011, Vol 25, Issue 3, p537
- ISSN
0888-7993
- Publication type
Article
- DOI
10.2308/acch-50028