CEO power and the strategic selection of accounting financial experts to the audit committee

Bedford, A; Ghannam, S; Grosse, M; Ma, N

CEO power and the strategic selection of accounting financial experts to the audit committee

Bedford, A

Ghannam, S Grosse, M Ma, N

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Publisher:: Wiley
Publication Type:: Journal Article
Citation:: Contemporary Accounting Research, 2023
Issue Date:: 2023-08-02

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Field	Value	Language
dc.contributor.author	Bedford, A https://orcid.org/0000-0003-2049-0492
dc.contributor.author	Ghannam, S
dc.contributor.author	Grosse, M
dc.contributor.author	Ma, N
dc.date.accessioned	2023-08-03T01:09:20Z
dc.date.available	2023-07-27
dc.date.available	2023-08-03T01:09:20Z
dc.date.issued	2023-08-02
dc.identifier.citation	Contemporary Accounting Research, 2023
dc.identifier.issn	0823-9150
dc.identifier.uri	http://hdl.handle.net/10453/171707
dc.description.abstract	We examine the role of CEO power in the appointment of accounting financial experts (AFEs) to firm audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to their audit committees. Additionally, effective AFEs—those characterized by experience, high status, and social independence from the CEO—are less likely to be appointed in firms with powerful CEOs. In the presence of powerful CEOs, effective AFEs are also less likely to be designated audit committee chair. The absence of effective AFEs is associated with the use of accounting discretion by powerful CEOs to meet or just beat analyst earnings forecasts. We find no evidence that AFEs choose to avoid serving on the boards of firms with powerful CEOs. Our findings are consistent with powerful CEOs influencing board appointments post-SOX through informal channels, including through their social ties with nominating committees. Our results suggest that current regulations prohibiting CEO involvement in the director nomination process and specifying who qualifies as a financial expert may be insufficient to ensure audit committee effectiveness and financial reporting quality.
dc.language	en
dc.publisher	Wiley
dc.relation.ispartof	Contemporary Accounting Research
dc.relation.isbasedon	10.1111/1911-3846.12892
dc.rights	info:eu-repo/semantics/embargoedAccess
dc.subject	1501 Accounting, Auditing and Accountability
dc.subject.classification	Accounting
dc.subject.classification	3501 Accounting, auditing and accountability
dc.title	CEO power and the strategic selection of accounting financial experts to the audit committee
dc.type	Journal Article
utslib.for	1501 Accounting, Auditing and Accountability
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	embargoed	*
pubs.consider-herdc	false
utslib.copyright.embargo	2024-08-02T00:00:00+1000Z
dc.date.updated	2023-08-03T01:09:19Z
pubs.publication-status	Published online

Abstract:

We examine the role of CEO power in the appointment of accounting financial experts (AFEs) to firm audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to their audit committees. Additionally, effective AFEs—those characterized by experience, high status, and social independence from the CEO—are less likely to be appointed in firms with powerful CEOs. In the presence of powerful CEOs, effective AFEs are also less likely to be designated audit committee chair. The absence of effective AFEs is associated with the use of accounting discretion by powerful CEOs to meet or just beat analyst earnings forecasts. We find no evidence that AFEs choose to avoid serving on the boards of firms with powerful CEOs. Our findings are consistent with powerful CEOs influencing board appointments post-SOX through informal channels, including through their social ties with nominating committees. Our results suggest that current regulations prohibiting CEO involvement in the director nomination process and specifying who qualifies as a financial expert may be insufficient to ensure audit committee effectiveness and financial reporting quality.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/171707