Political connections of independent directors and earnings quality: The case of French firms

Badreddine Hamdi

Economics Letters, 2024, vol. 244, issue C

Abstract: This paper examines the impact of political connections of independent board directors on earnings quality. We used two proxies of earnings quality, namely, discretionary accruals and real earnings management. Based on a sample of 1,936 firm-year observations from 2012 to 2022, our results reveal that firms with politically connected independent directors are more likely to display lower earnings quality in higher discretionary accruals and greater real activities manipulation. These results suggest that the monitoring role of independent directors in constraining earnings management practices, as emphasized by the agency theory, may be compromised by political connections.

Keywords: Earnings quality; Independent directors; Real earnings management; Accruals earnings management; Political connections (search for similar items in EconPapers)
JEL-codes: G34 G38 M42 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004804

DOI: 10.1016/j.econlet.2024.111996

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