Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 7, 2023 erstellt
Description:
We examine the role of Chief Executive Officer (CEO) power in the selection of accounting financial experts (AFEs) to audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to the audit committee. Furthermore, firms with powerful CEOs are less likely to appoint “effective AFEs,” defined as those who are experienced, have high-status, and are socially independent from the CEO. In the presence of a powerful CEO, effective AFEs are also less likely to be designated as the chair of the audit committee. The absence of effective AFEs is associated with powerful CEOs using accounting discretion to meet or just beat analyst earnings forecasts. We find no evidence of AFEs choosing to avoid boards with powerful CEOs. Our findings are consistent with powerful CEOs influencing board appointments post-SOX through informal channels, including social ties with the nominating committee. Our results suggest that current regulatory requirements prohibiting CEO involvement in the director nomination process and the current definition of financial experts may be insufficient to ensure audit committee effectiveness and financial reporting quality