The effect of accounting academics in the boardroom on the value relevance of financial reporting information

Huang, Haijie; Lee, Edward; Lyu, Changjiang; Zhu, Zhenmei

doi:10.1016/j.irfa.2016.02.003

Cited by 26 publications

(33 citation statements)

References 91 publications

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“…Huang et al. () analyse how accounting academics in the board of directors affect the VR of change in earnings. They report that the interaction of accounting academics in the board of directors with a change in earnings is statistically significant and positive.…”

Section: Selected Literaturementioning

confidence: 99%

How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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Most value relevance (VR) studies consider an accounting item value relevant if the regression coefficient (RC) of that item is statistically significant. Unobservable heterogeneity leads to biased RCs, interpretation of which generates incorrect inferences. To obtain unbiased RCs, the effect of unobservable heterogeneity on RCs should be mitigated. As two dimensions of unobservable heterogeneity are at the firm level and time level, outcomes with the following unobservable heterogeneity concerns are discussed: i) no fixed-effects (FE); ii) firm FE; iii) time FE; and iv) two-way (firm and time) FE. By employing a sample of Turkish firms from 2005-2014, we report several findings. First, we find that regressions with firm (time) FE yield large (low) RCs vis-à-vis regressions with no FE, and regressions with two-way FE generate balanced RCs compared to the others. Second, we compare RCs with i and iv, and conclude that the book value of equity becomes more value relevant while net income does not after controlling for unobservable heterogeneity. Last, we arbitrarily divide the entire period into two to reveal how unobserved endogeneity affects the comparison of RCs belonging to different periods. Our outcomes robustly reveal that unobserved endogeneity leads to erroneous RC comparisons.

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Section: Selected Literaturementioning

confidence: 99%

How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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“…For the advisory role, Francis et al (2015) find that companies with academic directors are more innovative due to their specialised expertise; while for the monitoring role, Francis et al (2015) and Trainor and Finnegan (2013) find that academic directors are associated with less discretionary accruals, indicating that academic directors improve the financial reporting quality of the company. In a similar vein, Huang et al (2016) report that academic directors, specifically accounting academics as outside directors, improve financial reporting quality and enhance corporate transparency. More importantly, greater value relevance of reported earnings appears in companies where accounting academics serve as financial experts on the board.…”

Section: Academic Directors As a Signalling Mechanismmentioning

confidence: 97%

“…For these reasons, the board of directors should comprise directors from diverse backgrounds. This can be achieved by appointing academicians, because such individuals possess valuable knowledge needed for making strategic decisions and have better communication and management skills (Anderson et al, 2011;Huang et al, 2016). The appointment of intellectuals as board members can also signal to potential investors that the company is a legitimate one, worthy of support, which could help to reduce the cost of external capital (Hillman and Dalziel, 2003).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Similarly, Audretsch and Lehmann (2006) contend that directors with an academic background can enhance the competitive advantage of companies by facilitating access to and absorption of external knowledge spill-over. In fact, Huang et al (2016) find that academic directors who are accounting academics can substitute auditors' monitoring role in financial reporting. A study by Cho et al (2017) also finds that companies with professors as directors are associated with higher corporate social responsibility (CSR) performance rating indicating that university professors possess some high ethically and socially responsible standards which may constitute an important factor that can affect corporate policy, like CSR activities.…”

Section: Academic Directors As a Signalling Mechanismmentioning

confidence: 99%

“…A director's education signals his/her intellect and ability to better handle challenges (Bhagat et al, 2010). In fact, highly educated directors (Haniffa and Cooke, 2002;Wang et al, 2017) and academic directors provide better governance to the company in terms of advising and monitoring functions, thereby contributing to the corporate information environment (Cho et al, 2017;Francis et al, 2015;Huang et al, 2016;White et al, 2014). Therefore, this study considers the presence of academic directors on the board at the time of an IPO as an important signalling mechanism that can be used strategically to reduce the degree of risks and uncertainties surrounding the IPO, leading to lower initial returns in the Malaysian IPO market.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Academic directors and IPO initial returns

Badru

Zaluki

Hussin

2018

IJBGE

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This study examines the impact of academic directors on IPO initial returns. With a sample of 208 Malaysian IPOs over the period of 2005 to 2015 and applying a quantile regression (QR) technique, this study finds that the academic directors are significantly and negatively associated with IPO initial returns, indicating IPOs with more directors from the academia can better serve as a signal of a company's quality. Such directors are perceived by potential investors as intellectuals capable of providing knowledgeable skills in complex decision-making, like IPO, as well as advising and monitoring the management. These findings indicate that IPO issuers can demonstrate their quality through a highly educated board.

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Revolutionizing green business: The power of academic directors in accelerating eco‐innovation and sustainable transformation in China

Ullah,

Jiang,

Elamer

2024

Bus Strat Env

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This study investigates the relationship between academic directors and corporate eco‐innovation in Chinese A‐listed firms in the context of the growing urgency of climate change. Based on the argument that academic directors bring advanced knowledge, skills, experience, and expertise to a corporate board and are more socially responsible and ethical, we hypothesized that academic directors would have a positive influence on corporate eco‐innovation. We also examine how this nexus is moderated by pollutant firms and firms having qualified foreign institutional investors (QFIIs). Our results suggest that academic directors have a positive and significant impact on corporate eco‐innovation. The findings remain robust even after employing alternate proxies for both independent and dependent variables, minimizing reverse causality and endogeneity concerns, and addressing self‐selection bias through the entropy balancing method. Additionally, our study reveals that the positive nexus between academic directors and eco‐innovation is more pronounced in pollutant firms and firms having QFIIs. This study contributes to the literature on corporate governance, eco‐innovation, and emerging markets by providing evidence of the positive influence of academic directors on eco‐innovation, highlighting the importance of their contribution to enhancing corporate governance mechanisms to promote environmentally friendly activities and sustainability practices. Furthermore, our findings offer insight into the role of QFIIs in strengthening the positive association between academic directors and eco‐innovation, suggesting that foreign investors can support and encourage firms to adopt environmentally friendly practices for long‐term benefits.

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The effect of accounting academics in the boardroom on the value relevance of financial reporting information

Cited by 26 publications

References 91 publications

How Does Unobserved Heterogeneity Affect Value Relevance?

How Does Unobserved Heterogeneity Affect Value Relevance?

Academic directors and IPO initial returns

Revolutionizing green business: The power of academic directors in accelerating eco‐innovation and sustainable transformation in China

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