Do professional ties enhance board seat prospects of independent directors with tainted reputations?

Chen Chen, Ying Dou, Yu Flora Kuang and Vic Naiker

Journal of Banking & Finance, 2023, vol. 154, issue C

Abstract: This study shows how professional ties assist directors in gaining future board positions when their reputation is tainted by accounting fraud. We demonstrate that the influence of professional ties is more prominent for directors who are more heavily impacted by fraud. This effect is also stronger when directors share professional ties with key board members in the appointing firms. Additional tests show that appointments of these directors are associated with more favorable market reactions compared to appointments of other tainted directors. We also find that firms’ financial reporting quality improves after appointing professionally connected tainted directors.

Keywords: Professional ties; Tainted directors; Accounting fraud; Board director appointments (search for similar items in EconPapers)
JEL-codes: G12 G21 G30 M14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:154:y:2023:i:c:s037842662300170x

DOI: 10.1016/j.jbankfin.2023.106972

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