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From watchdog to watchman: Do independent directors monitor a CEO of their own age?

journal contribution
posted on 01.02.2021, 13:19 by Yaoyao 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.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

61

Pages

206-229

Publisher

Elsevier BV

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier

Publisher statement

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

Acceptance date

19/01/2021

Publication date

2021-01-27

Copyright date

2021

ISSN

0927-5398

Language

en

Depositor

Prof Hong Liu . Deposit date: 29 January 2021