Do Foreign Directors Mitigate Earnings Management? Evidence From China

Xingqiang Du, Wei Jian and Shaojuan Lai

The International Journal of Accounting, 2017, vol. 52, issue 2, 142-177

Abstract: In this study, we use a sample of Chinese companies to examine the monitoring role of foreign directors in deterring earnings management. Our findings show that earnings management is significantly negatively associated with the presence and ratio of foreign directors on corporate boards. We further find that, under these conditions, earnings management is less pronounced in state-owned enterprises as compared to others. These findings are robust to various specifications of earnings management as well as to the approach used in matching the treatment and control samples. Interestingly, the negative impact of board membership of foreign directors on earnings management varies with audit quality, IFRS convergence, investor protection and the similarity or difference of the time zones of the foreign directors and China.

Keywords: Foreign directors; Earnings management; State-owned enterprises (SOEs); China (search for similar items in EconPapers)
JEL-codes: G34 M41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:52:y:2017:i:2:p:142-177

DOI: 10.1016/j.intacc.2017.04.002

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