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CEO duality, earnings quality and board independence

Author

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  • Sandra Alves

Abstract

Purpose - This study draws on agency, theory to evaluate the relationship between chief executive officer (CEO) duality and earnings quality, proxied by discretionary accruals. Additionally, this study aims to examine whether board independence moderates the relationship between CEO duality and earnings quality. Design/methodology/approach - This study uses a fixed-effects regression model to examine the effect of CEO duality on earnings quality and to test whether board independence moderates that relationship for a sample of non-financial listed Portuguese firms-year from 2002 to 2016. Findings - Consistent with agency theory, this study suggests that CEO duality decreases earnings quality. Further, the results also suggest that the earnings quality reduction associated with CEO duality is attenuated when the board of directors has a higher proportion of independent directors. Practical implications - The findings based on this study provide useful information to investors and regulators in evaluating the impact of CEO duality on earnings quality and the effect of board independence on the role of CEO duality, especially under concentrated ownership. Originality/value - To the knowledge, this study is the first to investigate the role of board independence on the association between CEO duality and earnings quality. In addition, this paper is the first empirical study to investigate the direct and indirect effect of CEO duality on earnings quality in Portugal.

Suggested Citation

  • Sandra Alves, 2021. "CEO duality, earnings quality and board independence," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 21(2), pages 217-231, August.
    • Handle: RePEc:eme:jfrapp:jfra-07-2020-0191
    DOI: 10.1108/JFRA-07-2020-0191
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    Citations

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    Cited by:

    1. Hassan, M. Kabir & Houston, Reza & Karim, M.Sydul & Sabit, Ahmed, 2023. "CEO duality and firm performance during the 2020 coronavirus outbreak," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    2. Mihaela Curea, 2023. "Intangible assets and resource allocation: insights from European companies," Journal of Financial Studies, Institute of Financial Studies, vol. 8(15), pages 86-105, November.

    More about this item

    Keywords

    CEO duality; Earnings quality; Board independence; Agency theory; M41; M42; G34;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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