The initiation of audit committee interlocks and the contagion of accounting policy choices: evidence from special items

Ravi Dharwadkar (), David Harris (), Linna Shi () and Nan Zhou ()
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Ravi Dharwadkar: Syracuse University
David Harris: Syracuse University
Linna Shi: University of Cincinnati
Nan Zhou: University of Cincinnati

Review of Accounting Studies, 2020, vol. 25, issue 1, No 4, 120-158

Abstract: Abstract We document that the initiation of audit committee interlocks is associated with contagion in reported special items. We argue that this is, in part, attributable to contagion of accounting policy choices. We find that the special items of newly interlocked firms, unrelated before interlock, become positively correlated afterward, suggesting information transfer starts with interlock formation. This result holds for negative special items, key components of special items (asset impairments, restructuring costs, and gains/losses from asset sales), and is stronger for larger firms and for firms within the same industry.

Keywords: Audit committee interlock; Information transfer; Special items; Restructuring charges; SFAS 146 (search for similar items in EconPapers)
JEL-codes: D83 G34 M41 M42 M48 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11142-019-09516-w

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