Military-experienced directors, CEO busyness and financial statement footnotes readability: evidence from Indonesia

Effiezal Aswadi Abdul Wahab, Iman Harymawan, Damara Ardelia Kusuma Wardani and Mohammad Nasih

Asian Review of Accounting, 2024, vol. 33, issue 1, 18-42

Abstract: Purpose - This study examines the relationship between the characteristics of militarily experienced directors and financial statement footnote readability. The second research question considers whether CEO busyness impacts the relationship between military-experienced directors and financial statement footnotes readability. Design/methodology/approach - We use nonfinancial listed firms on the Indonesian Stock Exchange from 2010 to 2018, which amounted to 1,002 firm-year observations. We test the hypotheses and use fixed effects and Heckman's two-stage regression. Findings - This study documents a negative relationship between military directors and financial statement footnote readability. We extend this relationship by factoring board busyness into the equation. We find that the presence of military-connected and busy CEOs negatively impacts the readability of financial statement footnotes. The results remain robust after additional analyses. Research limitations/implications - Future research should consider a more robust measure of military-experienced directors. A broader context of directors' busyness should be considered, such as including multiple directorships. Originality/value - We revisit the literature on military-experienced directors by considering political connections as one of the proxies for military connections in Indonesia. The findings largely support the convergence of the political connections literature in which rent-seeking activities are prevalent and prevent sound financial reporting.

Keywords: Military connection; CEO busyness; Readability; Governance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-09-2023-0246

DOI: 10.1108/ARA-09-2023-0246

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