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Directors network centrality and earnings quality

Author

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  • Bright Gershion Godigbe
  • Chin Man Chui
  • Chih-Liang Liu

Abstract

This study examines whether firms with network central boards of directors behave differently from other firms in terms of financial reporting quality. We find that earnings quality among firms is low when board networks are channels of incorrect information transmission (including earnings management information) and for firms whose directors are awarded equity-based compensation have connections through boardroom networks, but earnings quality is better for firms with good performance in spite of their networks. These results are robust to controlling for firm information environment, growth, size, age, leverage, performance, volatility in firm operations, and corporate governance.

Suggested Citation

  • Bright Gershion Godigbe & Chin Man Chui & Chih-Liang Liu, 2018. "Directors network centrality and earnings quality," Applied Economics, Taylor & Francis Journals, vol. 50(50), pages 5381-5400, October.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:50:p:5381-5400
    DOI: 10.1080/00036846.2018.1486992
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    Cited by:

    1. Bibek Bhattacharya & Ipsu Khadka & Dalhia Mani, 2022. "Shaking Up (and Keeping Intact) the Old Boys’ Network: The Impact of the Mandatory Gender Quota on the Board of Directors in India," Journal of Business Ethics, Springer, vol. 177(4), pages 763-778, May.
    2. Bhattacharya, Mita & Inekwe, John Nkwoma & Valenzuela, Maria Rebecca, 2020. "Credit risk and financial integration: An application of network analysis," International Review of Financial Analysis, Elsevier, vol. 72(C).

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