The impact of CEO/CFO outside directorships on auditor selection and audit quality

We examine whether outside directorships of chief executive officer/chief financial officer (CEO/CFO) and resulting network ties to auditors affect auditor selection decisions and subsequent audit quality. The network ties arise when the CEO/CFO of a firm (home firm) serves as an outside director of another firm that hires an auditor (connected auditor). Using a sample of firms that switch auditors in the post-Sarbanes-Oxley Act period, we find that home firms are more likely to appoint connected auditors. We also find that home firms hiring connected auditors experience a significant decline in subsequent audit quality, compared to those hiring non-connected auditors. Specifically, the increases in the likelihood of misstatements, the magnitude of absolute discretionary accruals, and the propensity to meet or beat earnings benchmarks after home firms appoint connected auditors are significantly greater, compared to those for other firms switching to non-connected auditors. We further find that the decline in audit quality is more pronounced when the network is established at the local office level

The downside of the network ties between CEO/CFOs and auditors through external directorships: Evidence from auditor selection and subsequent audit quality

Paper was updated on November 2017</p

Professors on the Board: Do They Contribute to Society Outside the Classroom?

According to our data, 38.5 % of S&P 1500 firms have at least one professor on their boards. Given the lack of research examining the roles and effects of academic faculty as members of boards of directors (professor–directors) on corporate outcomes, this study investigates whether firms with professor–directors are more likely to exhibit higher corporate social responsibility (CSR) performance ratings. Results indicate that firms with professor–directors do exhibit higher CSR performance ratings than those without. However, the influence of professor–directors on firm CSR performance ratings depends on their academic background—the positive association between the presence of professor–directors and firm CSR performance ratings is significant only when their academic background is specialized (e.g., science, engineering, and medicine). Finally, this positive association weakens when professor–directors hold an administrative position at their universities

The nature of voluntary disclosure around CEO change and types of CEO departure and succession

This study examines whether the positive or negative news nature of firms\u27 voluntary disclosures around their CEO changes is related to the timing of disclosures (before and after CEO changes), types of CEO departure (voluntary and involuntary), and types of CEO succession (from inside or outside). It is possible that departing CEO\u27s incentives for voluntary disclosures are different from new CEO\u27s, so that the nature of voluntary disclosures is likely different between before and after CEO change. In addition, departing CEO\u27s incentives to provide voluntary disclosures may also depend upon whether he leaves voluntarily or involuntarily, and new CEO\u27s incentives may depend upon whether he is from inside or outside of the firms. The results show that the sample firms are more likely to disclose positive news before CEO change than after, and negative news after CEO change than before. The voluntary disclosure of positive news before CEO change is more likely when old CEOs leave involuntarily than when they leave voluntarily. However, the likelihood of the voluntary disclosure of negative news after CEO change is not reliably related to types of departure. Also, the nature of voluntary disclosure after CEO change is at best marginally related to types of CEO succession, from inside or outside. Taken together, the results suggest that the potential conflict of interests between departing and new CEOs affects firms\u27 voluntary disclosure policies. The types of old CEO\u27s departure affect firms\u27 voluntary disclosures, while the types of new CEO\u27s succession has little effect on voluntary disclosures

Accurate and Efficient Computation of System-Level ESD Noise Waveforms in ISO 10605 Standard Using Decomposition Method and Split-Domain Approach

In this article, an accurate and efficient computational method of system-level electrostatic discharge (ESD) noise waveforms in a field-coupled ESD test of the ISO 10605 standard using a 3-D full-wave solver is proposed. To apply efficient computational methods to the ESD test simulation, the split-domain approach and decomposition method are first individually validated with a simple structure. Next, a method simultaneously using the decomposition method and split-domain approach is proposed and validated with the separately given field source data. Using the proposed method with the measured electromagnetic fields radiated from an ESD generator, the ESD noise waveforms in the ISO 10605 field-coupled ESD test are accurately and efficiently computed by considering not only the ESD current coupling but also the radiated coupling from the ESD generator