The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies
Agency theory suggests that independent outside board members may have an important monitoring function of the financial reporting process. As a result, boards with more independent directors have a tendency for increased monitoring and are therefore expected to insist on better earnings quality. Th...
Main Author: | |
---|---|
Format: | Article |
Language: | English |
Published: |
University of Wollongong
2014-09-01
|
Series: | Australasian Accounting, Business and Finance Journal |
Subjects: | |
Online Access: | http://ro.uow.edu.au/aabfj/vol8/iss3/3 |
id |
doaj-928aea1628124d02a63863ce58574318 |
---|---|
record_format |
Article |
spelling |
doaj-928aea1628124d02a63863ce585743182020-11-24T22:56:10ZengUniversity of WollongongAustralasian Accounting, Business and Finance Journal1834-20001834-20192014-09-0183234410.14453/aabfj.v8i4.3The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed CompaniesSandra Alves0University of Aveiro, PortugalAgency theory suggests that independent outside board members may have an important monitoring function of the financial reporting process. As a result, boards with more independent directors have a tendency for increased monitoring and are therefore expected to insist on better earnings quality. This study examines whether board independence improves earnings quality by reducing earnings management in Portugal, a country with significantly different institutional and legal characteristics from the Anglo-Saxon countries. Using ordinary least square (OLS) and two stage least squares (2SLS) techniques to control potential simultaneity problems between board independence and earnings quality, we find evidence that independent board members improve earnings quality by reducing earnings management for a sample of Portuguese listed firms. This result suggests that strengthening the independence of boards by appointing more independent board members is a positive step toward improving earnings quality.http://ro.uow.edu.au/aabfj/vol8/iss3/3board independenceearnings qualitydiscretionary accrualsPortugal |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Sandra Alves |
spellingShingle |
Sandra Alves The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies Australasian Accounting, Business and Finance Journal board independence earnings quality discretionary accruals Portugal |
author_facet |
Sandra Alves |
author_sort |
Sandra Alves |
title |
The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies |
title_short |
The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies |
title_full |
The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies |
title_fullStr |
The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies |
title_full_unstemmed |
The Effect of Board Independence on the Earnings Quality: Evidence from Portuguese Listed Companies |
title_sort |
effect of board independence on the earnings quality: evidence from portuguese listed companies |
publisher |
University of Wollongong |
series |
Australasian Accounting, Business and Finance Journal |
issn |
1834-2000 1834-2019 |
publishDate |
2014-09-01 |
description |
Agency theory suggests that independent outside board members may have an important monitoring function of the financial reporting process. As a result, boards with more independent directors have a tendency for increased monitoring and are therefore expected to insist on better earnings quality. This study examines whether board independence improves earnings quality by reducing earnings management in Portugal, a country with significantly different institutional and legal characteristics from the Anglo-Saxon countries. Using ordinary least square (OLS) and two stage least squares (2SLS) techniques to control potential simultaneity problems between board independence and earnings quality, we find evidence that independent board members improve earnings quality by reducing earnings management for a sample of Portuguese listed firms. This result suggests that strengthening the independence of boards by appointing more independent board members is a positive step toward improving earnings quality. |
topic |
board independence earnings quality discretionary accruals Portugal |
url |
http://ro.uow.edu.au/aabfj/vol8/iss3/3 |
work_keys_str_mv |
AT sandraalves theeffectofboardindependenceontheearningsqualityevidencefromportugueselistedcompanies AT sandraalves effectofboardindependenceontheearningsqualityevidencefromportugueselistedcompanies |
_version_ |
1725654571321131008 |