posted on 2021-02-01, 13:19authored byYaoyao Fan, Yuxiang Jiang, Kose John, Hong LiuHong Liu
We examine the impact of age similarity between independent directors and the CEO
on earnings management. Using changes in independent director composition due to sameaged director deaths and retirements for identification, we find that firms with the presence of
independent directors who have the same age with the CEO are more likely to manage earnings.
We further find that age similarity between these two parties increases earnings management
through lowering the effectiveness of board monitoring. Additionally, this positive impact
decreases as the age gap widens, but intensifies if independent directors share other
characteristics with the CEO, if independent directors sit on audit or nomination committees,
if firms with lower information asymmetry and if CEOs are older. Our results are robust to
alternative proxies of earnings management.
This paper was accepted for publication in the journal Journal of Empirical Finance and the definitive published version is available at https://doi.org/10.1016/j.jempfin.2021.01.008