Open AccessThe Composition and Compensation of the Board of Directors as Predictors of Corporate Fraud
Author(s) -
Joung Yeon Kim,
Dianne M. Roden,
Steven R. Cox
Publication year - 2013
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v2n3p142
Subject(s) - compensation (psychology) , composition (language) , business , accounting , psychology , social psychology , linguistics , philosophy
We test whether the composition and compensation of the board of directors are related to fraudulent corporate behavior. We use Accounting and Auditing Enforcement Releases from 2003 through 2010 to form a sample of 128 firms with violations and compare the characteristics of their boards to a matched sample of 128 control firms. SEC violations are less likely when the board has more women, independent members, and financial experts. Fraud is also less likely when director tenure is shorter and when the CEO is not the chair. Stock and especially stock option compensation are positively associated with SEC violations.