Monitoring by Busy and Overlap Directors: An Examination of Executive Remuneration and Financial Reporting Quality

REFC – Spanish Journal of Finance and Accounting (Forthcoming)

53 Pages Posted: 18 Oct 2016

See all articles by Carlos Fernandez

Carlos Fernandez

Oviedo University - School of Economics and Business

Rubén Arrondo García

Universidad de Oviedo - Facultad de Economicas

Shams Pathan

University of Newcastle - Newcastle University Business School

Date Written: October 13, 2016

Abstract

We examine the influence of multiple board directorships and boards’ committee memberships on three board supervisory outcomes: executive remuneration, external auditor opinion and earnings management. The study uses a panel of 122 non-financial companies listed on the Spanish Stock Exchange over the period 2004-2011. Our results show that firms with busy directors offer low executive remuneration and present a low probability of a qualified audit opinion. Furthermore, the results indicate that firms with overlap directors exhibit a higher probability of receiving a qualified audit opinion. Additionally, we find evidence that the over commitment effects of busy and overlap directors are more evident for large firms. Overall, our findings suggest that busy (overlap) directors are beneficial (detrimental) to the monitoring capability of the board in the Spanish context.

Keywords: Board, Executive remuneration, Busy directors, Overlap directors, Audit opinion, earnings management

JEL Classification: G30, G32, G34, G38

Suggested Citation

Fernandez, Carlos and García, Rubén Arrondo and Pathan, Shams, Monitoring by Busy and Overlap Directors: An Examination of Executive Remuneration and Financial Reporting Quality (October 13, 2016). REFC – Spanish Journal of Finance and Accounting (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2852312

Carlos Fernandez (Contact Author)

Oviedo University - School of Economics and Business ( email )

Campus del Cristo, s/n
Oviedo, Asturias 33071
Spain

Rubén Arrondo García

Universidad de Oviedo - Facultad de Economicas ( email )

Campus del Cristo, s/n
Oviedo, Asturias 33071
Spain

Shams Pathan

University of Newcastle - Newcastle University Business School ( email )

5 Barrack Road
Frederic Douglass Centre
NEWCASTLE UPON TYNE, NE4 5TG
United Kingdom

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