Lead independent director and earnings management

Abstract

AbstractIn this study, we examine the effects of lead independent directors (LIDs) on firms' earnings management. On the basis of US firms from 2000 to 2018, those with LIDs managed earnings less, as reflected by the absolute value of discretionary accruals. Specifically, we find the effect is likely to be more prominent among firms with less disclosure transparency, weaker corporate governance and higher risk. In addition, we find that firms with LIDs tend to increase R&D and capital expenditures, reduce leverages and enhance firm values. Overall, the findings indicate the monitoring of LIDs can effectively reduce firms' earnings management and enhance firm values.