Accounting conservatism and board of director characteristics: An empirical analysis

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jacceco.2007.01.005 Byline: Anwer S. Ahmed (a), Scott Duellman (b) Keywords: Accounting conservatism; Board independence; Outside directors; Corporate governance; Agency costs Abstract: Using three different measures of conservatism, we document that (i) the percentage of inside directors is negatively related to conservatism, and (ii) the percentage of outside directors' shareholdings is positively related to conservatism. Our results hold after controlling for industry, firm size, leverage, growth opportunities, institutional ownership, inside director ownership, and unobservable firm characteristics that are stable over time. Overall, the evidence is consistent with accounting conservatism assisting directors in reducing agency costs of firms. Author Affiliation: (a) Texas A & M University, Texas, USA (b) Department of Accounting, School of Management, State University of New York at Binghamton, Binghamton, NY 13902, USA Article Note: (footnote) [star] We thank Bill Baber, Bill Brown, Ravi Dharwadkar, Randy Elder, David Harris, Sok-Hyon Kang, Krishna Kumar, Gerry Lobo, P.K. Sen, Doug Stevens, Ross Watts (the editor), an anonymous referee, and workshop participants at the University of Cincinnati, University of New Hampshire, George Washington University, Syracuse University, and the 2006 AAA annual meeting for helpful comments.