Articlebronze2004

The Link Between Earnings Timeliness, Earnings Conservatism and Board Composition: evidence from the UK

410 citations0/0 files storedCorporate Governance An International Review

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

This paper examines the links between accounting quality, proxied by earnings timeliness and conservatism, and the composition of the board of directors. Results indicate that firms with a higher proportion of outside board members are more likely to recognise bad news in earnings on a timely basis. However, firms whose boards comprise a relatively high proportion of outsiders do not display greater reporting conservatism with regard to the recognition of good news. These findings suggest that board composition is an important factor in determining the quality of UK firms’ reported earnings with respect to incorporating bad news on a timely basis.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 1980Agency Problems and the Theory of the Firm 1985Positive Accounting Theory 2002Audit committee, board of director characteristics, and earnings management 1988Outside directors and CEO turnover 1996Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC*1997The conservatism principle and the asymmetric timeliness of earnings1

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