Do non-staggered board elections matter to earnings quality and the value relevance of earnings and book value?

Shuling Chiang, Gary Kleinman, Picheng Lee

Research output: Contribution to journalArticle

Abstract

Purpose: The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach: The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings: The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance. Research limitations/implications: The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well. Originality/value: This study deepens the field's understanding of the impact of corporate governance arrangements and schedules for electing board of directors' members on issues of interest to stockholders.

Original languageEnglish
Pages (from-to)46-66
Number of pages21
JournalReview of Accounting and Finance
Volume16
Issue number1
DOIs
StatePublished - 1 Jan 2017

Fingerprint

Book value
Earnings quality
Elections
Value relevance
Corporate governance
Board of directors
Stock prices
Taiwan
Discretionary accruals
Suspicion
Earnings persistence
Globe
Design methodology
Stockholders
Share prices
Multiple regression analysis
Testing
Schedule
Earnings per share
Voting

Keywords

  • Board elections
  • Earnings quality
  • Non-staggered board
  • Value relevance

Cite this

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abstract = "Purpose: The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach: The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings: The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance. Research limitations/implications: The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well. Originality/value: This study deepens the field's understanding of the impact of corporate governance arrangements and schedules for electing board of directors' members on issues of interest to stockholders.",
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Do non-staggered board elections matter to earnings quality and the value relevance of earnings and book value? / Chiang, Shuling; Kleinman, Gary; Lee, Picheng.

In: Review of Accounting and Finance, Vol. 16, No. 1, 01.01.2017, p. 46-66.

Research output: Contribution to journalArticle

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