Director Connectedness: Monitoring Efficacy and Career Prospects. (14th February 2018)

• Record Type: Journal Article
• Authors: Intintoli, Vincent J.; Kahle, Kathleen M.; Zhao, Wanli
• Is Part Of: Journal of financial and quantitative analysis. Volume 53:Number 1(2018)
• Page Start: 65
• Page End: 108
• Publication Date: 2018-02-14
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109018000017
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : We examine a specific channel through which director connectedness may improve monitoring: financial reporting quality. We find that the connectedness of independent, non-co-opted audit committee members has a positive effect on financial reporting quality and accounting conservatism. The effect is not significant for non-audit committee or co-opted audit committee members. Our results are robust to tests designed to mitigate self-selection. Consistent with connected directors being valuable, the market reacts more negatively to the deaths of highly connected directors than to the deaths of less connected directors. Better connected directors also have better career prospects, suggesting they have greater incentives to monitor.