TITLE:
Active Independent Directors and Earnings Quality
AUTHORS:
Yuanto Kusnadi, Bin Srinidhi, Ye Sun, Jiwei Wang
KEYWORDS:
Active Independent Directors, Earnings Quality, Corporate Governance
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.3,
June
29,
2022
ABSTRACT: We examine the relationship between active
independent directors and earnings quality for U.S. firms. We construct
measures that proxy for activeness of independent directors and find that the
proportion of active independent directors is under half on average. Our
finding shows that earnings quality increases with the percentage of active
independent directors on the board. Once the active independent directors are
separated out, the other independent directors do not have any effect on
earnings quality. This finding supports the hypothesis that the activeness of
independent directors is incrementally significant over just the proportion of
independent directors for the quality of reported earnings.