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Examining the spread of high quality reporting through the corporate network

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  • Felix, Robert

Abstract

This paper explores whether high reporting quality spreads through the network formed by shared directors. Consistent with the notion that positive information is generally less impactful than negative information in affecting behavior, I find that a firm's own reporting quality is not affected by sharing a director with a firm that is considered to have high reporting quality. However, I find that a firm's reporting quality improves when the firm shares a director with a high reporting quality firm and a firm that is highly connected in the network (i.e.: central). The results suggest that high reporting quality needs the endorsement of a high status firm such as a central firm to travel through the network. Furthermore, firms that are susceptible to poor reporting are the most receptive to the high reporting quality signal coming through central firms. Altogether, this study documents that central firms are in a position to initiate positive reporting contagion.

Suggested Citation

  • Felix, Robert, 2016. "Examining the spread of high quality reporting through the corporate network," Advances in accounting, Elsevier, vol. 32(C), pages 31-41.
    • Handle: RePEc:eee:advacc:v:32:y:2016:i:c:p:31-41
    DOI: 10.1016/j.adiac.2016.01.001
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    Cited by:

    1. Abdelbadie, Roba Ashraf & Salama, Aly, 2019. "Corporate governance and financial stability in US banks: Do indirect interlocks matter?," Journal of Business Research, Elsevier, vol. 104(C), pages 85-105.

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    More about this item

    Keywords

    Board interlocks; Firm centrality; Reporting quality; Network; Audit committee;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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