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From watchdog to watchman: Do independent directors monitor a CEO of their own age?
journal contributionposted 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.
- Business and Economics