Serving the truth: Do directors with media background improve financial reporting quality? |
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| Institution: | 1. School of Business and Economics, University of Wisconsin – Stevens Point, 2100 Main Street, Stevens Point, WI 54481, United States of America;2. Department of Finance and Business Law, University of Wisconsin Whitewater, 800 Main Street, Whitewater, WI 53190, United States of America;1. Business School, Sichuan University, Chengdu, China;2. School of Economics & Management, Southwest Jiaotong University, Chengdu, China;3. School of Economics and Finance, Xi''an Jiaotong University, Xi''an, China;4. School of Business and Management, Queen Mary University of London, London, United Kingdom;1. Department of Economics, Management, and Statistics (DEMS), University of Milano-Bicocca, Piazza dell''Ateneo Nuovo, 1, 20126 Milano, MI, Italy;2. Department of Economics, University of Insubria, Varese, Italy;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, Sichuan 610074, China;2. Department of Finance, School of Economics and Management, Wuhan University, Wuhan, Hubei 430072, China;3. Hubei University of Economics, Wuhan, Hubei 430205, China;1. University of Liverpool Management School, Chatham Building, Chatham Street, Liverpool L69 7ZH, UK |
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| Abstract: | This study examines whether and how independent directors with media background affect financial reporting quality. Using a proprietary dataset of independent directors' backgrounds, we find that firms with media backgrounds directors sitting on the board have lower absolute discretionary accruals. Besides, the effect is more pronounced when media background independent directors are from a news agency, or the directors bear higher reputation cost. Furthermore, media independent directors play a monitoring role by saying “no” at the board meeting and increasing the probability of exposure to financial frauds to reduce discretionary accruals. Overall, our evidence suggests that media independent directors with higher integrity and reputation concerns could improve firms' financial quality. |
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