Directors' Service Horizon and Managerial Myopia: Evidence from Real Earnings Management
研究发现，独立董事因并购失去外部董事职位后，会延长其剩余董事职位的服务期限，从而减少真实盈余管理行为，且对声誉关注度高、治理薄弱的企业影响更显著。
SYNOPSIS This study investigates how directors’ service horizon affects real earnings management (REM). By exploiting mergers and acquisitions that terminate directors’ outside appointments on the acquired firms’ boards, we show that independent directors who lose outside board appointments extend their service horizon for remaining directorships and that a decrease in REM follows the extension of director service horizon. The effect of director horizon extension on REM is stronger for directors with more reputation concerns or power to influence financial reporting, for firms with weaker governance mechanisms, and for firms facing lower capital market benefits of meeting or beating earnings expectations. Consistent with enhanced long-term orientation as a result of extended service horizon, we also find a positive impact of director service horizon on firm innovation. Overall, this study sheds light on the important effect of director service horizon on board effectiveness. JEL Classifications: G30; G34; M40.