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Political connections of independent directors and earnings quality: The case of French firms

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  • Hamdi, Badreddine

Abstract

This paper examines the impact of political connections of independent board directors on earnings quality. We used two proxies of earnings quality, namely, discretionary accruals and real earnings management. Based on a sample of 1,936 firm-year observations from 2012 to 2022, our results reveal that firms with politically connected independent directors are more likely to display lower earnings quality in higher discretionary accruals and greater real activities manipulation. These results suggest that the monitoring role of independent directors in constraining earnings management practices, as emphasized by the agency theory, may be compromised by political connections.

Suggested Citation

  • Hamdi, Badreddine, 2024. "Political connections of independent directors and earnings quality: The case of French firms," Economics Letters, Elsevier, vol. 244(C).
  • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004804
    DOI: 10.1016/j.econlet.2024.111996
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    More about this item

    Keywords

    Earnings quality; Independent directors; Real earnings management; Accruals earnings management; Political connections;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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