The relationship between minority directors and earnings management: An empirical analysis in the Italian institutional setting

Pietro Fera,Giorgio Ricciardi,Michele Pizzo,Nicola Moscariello

doi:10.22495/ncpr_16

Abstract

This study contributes to the accounting literature, as it is the first to investigate on the relationship between minority directors and earnings management, extending knowledge and collecting new evidence on the relation between financial reporting quality and internal corporate governance mechanisms. Moreover, findings highlight the effectiveness of this corporate governance feature that can lead to benefits for non-controlling shareholders and financial markets

Highlights

T “NEW CHALLENGES IN CORPORATE GOVERNANCE: THEORY AND PRACTICE” Naples, October 3-4, 2019 the corporate controller from adopting opportunistic behaviors and protect minority shareholders from the discretionary activity of the block-holder, positively affecting the firm value
Among the various corporate governance features, the two measures of board monitoring that have been broadly related to higher earnings quality and less earning management are the proportion of outside directors and the existence of an audit committee (Klein, 2002; Xie et al, 2003; Peansell et al, 2005)
Some recent studies show that the relation between independent directors and the financial disclosure quality is not univocal and that not all independent directors have the same effectiveness in fostering corporate transparency (Marchetti et al, 2018)

Summary

Introduction

T “NEW CHALLENGES IN CORPORATE GOVERNANCE: THEORY AND PRACTICE” Naples, October 3-4, 2019 the corporate controller from adopting opportunistic behaviors and protect minority shareholders from the discretionary activity of the block-holder, positively affecting the firm value. Empirical evidence mostly confirms the positive impact of minority directors on firms’ corporate governance and financial performance and highlights the importance of minority directors as a mechanism to protect minority shareholders’ interests and to increase firm value.

Results

Conclusion