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The Impact of Board Internationalization on Earnings Management

Author

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  • Hooghiemstra, Reggy

    (Faculty of Economics and Business)

  • Hermes, Niels

    (Faculty of Economics and Business)

  • Oxelheim, Lars

    (Research Institute of Industrial Economics (IFN))

  • Randøy, Trond

    (School of Law and Business)

Abstract

Prior literature shows that choices regarding board composition are associated with earnings management. We add to this literature by examining the effects of the presence of a foreign board member on earnings management. Using a sample of 3,249 firm-year observations representing 586 non-financial listed Nordic firms during 2001–2008, we find that the presence of a non-Nordic, foreign director is associated with significantly higher levels of earnings management. Moreover, we provide preliminary evidence that differences in accounting knowledge drive this effect. Our results suggest that it may not necessarily be beneficial to appoint a foreign director to the board.

Suggested Citation

  • Hooghiemstra, Reggy & Hermes, Niels & Oxelheim, Lars & Randøy, Trond, 2015. "The Impact of Board Internationalization on Earnings Management," Working Paper Series 1096, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1096
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    More about this item

    Keywords

    Earnings management; Board composition; Internationalization; Foreign board member; Accounting knowledge;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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