Title

The Effect of Board Independence on the Information Environment and Information Asymmetry

Publication Type

Conference Paper

Publication Date

8-2012

Abstract

Our paper examines how the independence of a firm’s board affects its information environment in terms of earnings quality, management forecast frequency, analyst coverage, and information asymmetry among investors. Using board connections (defined as the fraction of directors who also sit on at least one other firm’s board that has a majority of independent directors) as our instrument of board independence, we show that greater board independence leads to higher earnings quality, greater management forecast frequency, and broader analyst coverage. We also show that these outcomes mediate the effect of board independence in reducing information asymmetry among investors in the equity markets.

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

American Accounting Association Annual Meeting

City or Country

Washington DC, USA