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Active Independent Directors and Earnings Quality
School of Accountancy, Singapore Management University, Singapore
College of Business, University of Texas, Arlington, USA
Shenzhen Stock Exchange, Shenzhen, China
School of Accountancy, Singapore Management University, Singapore
- 1 School of Accountancy, Singapore Management University, Singapore
- 2 College of Business, University of Texas, Arlington, USA
- 3 Shenzhen Stock Exchange, Shenzhen, China
- 4 School of Accountancy, Singapore Management University, Singapore
Theoretical Economics Letters·Volume 12 (2022)·Pages 897–915·Published 7 June 2022·DOI10.4236/tel.2022.123048
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Abstract
We examine the relationship between active independent directors and earnings quality for U.S. firms. We construct measures that proxy for activeness of independent directors and find that the proportion of active independent directors is under half on average. Our finding shows that earnings quality increases with the percentage of active independent directors on the board. Once the active independent directors are separated out, the other independent directors do not have any effect on earnings quality. This finding supports the hypothesis that the activeness of independent directors is incrementally significant over just the proportion of independent directors for the quality of reported earnings.
KeywordsActive Independent DirectorsEarnings QualityCorporate Governance
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