Board sub-committees and earnings quality
by Nigar Sultana; Steven F. Cahan; Frank Zhang
International Journal of Corporate Governance (IJCG), Vol. 8, No. 3/4, 2017

Abstract: The purpose of this study is to examine whether an overlap between compensation and audit committee memberships in firms affects earnings quality. We use a sample of 625 firm-year observations comprising data collected from Australian publicly listed firms between 2004 and 2010. Four measures of earnings quality are utilised to test our hypothesis. We find that firms with compensation and audit committee overlap exhibit higher earnings quality. Such sub-committee overlap is also more effective when overlapped members are independent and financial experts. Additional findings also indicate that female overlapped members are effective in reducing extreme earnings management. Findings have clear practical and regulatory implications in terms of the efficacy of sub-committee overlap.

Online publication date: Mon, 12-Feb-2018

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