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Does earnings management spread through board interlocks?

Iqbal, Abdullah and Nguyen, Nguyet Thi Minh and Shiwakoti, Radha K. (2015) Does earnings management spread through board interlocks? Working paper. Kent, UK (Submitted) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided)

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Abstract

The paper investigates whether aggressive earnings management practices spread across firms sharing interlocked directors. The evidence shows that if a firm aggressively manages earnings via accruals (or production activities and discretionary expenses) manipulation in a year, any firms which are interlocked with the firm in that year and the two following years are more likely to aggressively manage earnings via accruals (or production activities and discretionary expenses, respectively) manipulation. The contagion effect is found to be more pronounced if the interlocked director is older or charged with duties which could influence financial reporting. The spread of accruals-based and real earnings management practices via board networks as evidenced in this paper implies that allowing the ‘small world’ of board directors to serve in several companies would be harmful for financial information users.

Item Type: Monograph (Working paper)
Uncontrolled keywords: board interlock; earnings management; accruals; contagion; corporate governance
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School
Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Abdullah Iqbal
Date Deposited: 28 Nov 2017 11:39 UTC
Last Modified: 29 Jul 2019 18:43 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/64817 (The current URI for this page, for reference purposes)
Iqbal, Abdullah: https://orcid.org/0000-0002-3013-1007
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