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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/25982
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| Title: | Street Earnings and Board Independence |
| Authors: | Frankel, Richard
McVay, Sarah
Soliman, Mark |
| Keywords: | Street Earnings
Board Independence
Voluntary Disclosure
Earnings Quality |
| Issue Date: | Jul-2004 |
| Series/Report no.: | CLB-06-009 |
| Abstract: | We examine the characteristics of Street Earnings and board independence
to understand how board structure shapes disclosure. We find that
when boards contain fewer independent directors, exclusions from
Street Earnings (1) have more predictive ability for future earnings,
suggesting that the excluded expenses are less transitory, (2) are
increasingly likely to occur in quarters when Street Earnings exceed
analyst expectations but GAAP earnings do not, indicating that managers
are more likely to use Street Earnings to meet the analyst forecast, (3)
have a significantly stronger association with subsequent returns,
indicating that the excluded expenses are less transparent as investors
are slow to price their future earnings implications, and (4) are more
strongly related to the intensity of insider trading activity. We obtain
these results despite tests demonstrating that analysts reverse more
management exclusions as boards become less independent. Overall, our
results suggest that board independence is associated with the quality
of voluntary earnings-related disclosure. |
| URI: | http://hdl.handle.net/2451/25982 |
| Appears in Collections: | NYU Pollack Center for Law & Business Working Papers
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