Are qualified and experienced outside directors willing to join fraudulent firms and if so, why?

Publication Type:
Journal Article
Accounting Review, 2019, 94 (2), pp. 205 - 227
Issue Date:
Full metadata record
© 2019 American Accounting Association. All Rights Reserved. We investigate whether qualified and experienced directors are willing to join firms following the revelation of financial fraud. Specifically, we focus on directors with prior board experience and accounting and legal experts. We find that, notwithstanding the tarnished reputation of fraudulent firms and a higher workload, qualified and experienced directors join the boards of such firms. Subsequent to joining fraudulent firms, directors are rewarded with additional future board seats and benefit from higher compensation. We rule out alternative explanations and verify the robustness of the results by performing a variety of tests, including propensity score matching and difference-in-differences analysis.
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