Do social ties influence oversight quality? An analysis of firms listed on the Frankfurt stock exchange
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2017-11-29
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en
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This study investigates the relationship between social ties and quality of financial oversight. Social ties between CEO’s, CFO’s and the audit committees in Germany were gathered and used in a quantitative analysis. Earnings management and audit effort were used as proxies for quality of financial oversight. The empirical results indicate that friendship ties and advice ties between the CFO and audit committee decreases the level of audit effort. Moreover, friendship ties and advice ties between the audit committee and CEO do not have a significant negative effect on audit effort. Furthermore, the quantitative analysis of discretionary accruals indicates that friendship ties and advice ties between the CEO, CFO and audit committee members are not associated with earnings management.
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Faculteit der Managementwetenschappen