The Effect of Accounting Frauds on the Careers of Outside Directors: The Role of Director Independence
Open Access
Author:
Yeung, Timothy
Area of Honors:
Accounting
Degree:
Bachelor of Arts
Document Type:
Thesis
Thesis Supervisors:
Bin Ke, Thesis Supervisor Bin Ke, Thesis Supervisor Orie Edwin Barron, Thesis Honors Advisor
Keywords:
Accounting Fraud Director Independence Outside Directors
Abstract:
In this study, I examine the moderating effect of director independence on the association between the accounting frauds and the career outcomes of outside directors. I use a data set of all 38 previous outside directors of four prominent firms identified by the SEC as having committed financial statement fraud. My results show that reputation damage resulting from accounting frauds does have a negative impact on outside directors’ future directorship job market prospect, but the negative effect is reduced for independent outside directors. My results hold after controlling for a director’s past directorship experience. I also investigate whether frauds impact the current executive positions of the outside directors. Results indicate that independent outside directors are less likely to lose their executive roles in other firms.
