How is board external connectedness related to firm's earnings management?

• Main Authors: Tsai, Shin-Fang, 蔡欣芳
• Other Authors: Shu, Pei-Gi
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/60648719476576221698

碩士 === 輔仁大學 === 企業管理學系管理學碩士班 === 101 === In this study we explore how board external connectedness and the condition when firm seeking external financial sources are related to earnings management. We use the level of discretionary accruals gauged by the modified Jone’s model to serve as the metric of earnings management. The result from 5,836 listed firm-year data of the listed firms in Taiwan stock market in 2007-2011 sampling period indicates that the condition when firms seeking external financial sources, including the issuance of debt and seasoned equity offerings, is positively associated with the level of earnings management. We specifically explore board member’s external connectedness by their identity of being as an outside director, inside director, independent director or supervisor. The empirical result indicates when firm seeking external financial sources that only the external connectedness in the same industry of outside director and independent director is negatively correlated with the level of earnings management. More importantly, their external connectedness in the same industry further reduces the level of the level of earnings management. The result implies the monitoring function and learning effect of independent director.