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Watchdog from academia: Do academic independent directors matter for financial statement fraud?

Author

Listed:
  • Wen, Shigang
  • Li, Jianping
  • Huang, Chuangxia
  • Zhu, Xiaoqian

Abstract

We examine whether academic independent directors affect financial statement fraud. Using a sample of independent directors’ academic experience data for Chinese public firms, we find a significantly negative relation between academic independent directors and financial statement fraud. This finding is robust after applying various methods to address potential endogeneity concerns. Further analyses suggest that the negative relation between academic independent directors and financial statement fraud is more pronounced when academic independent directors are professors and possess accounting and technological expertise, sit on audit committees, compensation committees, multiple boards, and have relatively low-level compensation. In addition, the negative relation is stronger for non-state-owned firms and firms audited by small auditors. Overall, our findings suggest that academic independent directors are watchdogs for financial statement fraud.

Suggested Citation

  • Wen, Shigang & Li, Jianping & Huang, Chuangxia & Zhu, Xiaoqian, 2025. "Watchdog from academia: Do academic independent directors matter for financial statement fraud?," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s105905602500382x
    DOI: 10.1016/j.iref.2025.104219
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    Keywords

    Academic independent director; Financial statement fraud; Corporate governance; Board committee; Professor; Compensation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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