Blast from the Past: Directors' bankruptcy experience and financial reporting quality

Seminar abstract

We study if directors' corporate bankruptcy experience at one firm is associated with financial reporting quality at other firms where the director also serves in.

Using a sample of US directors interlocked with firms that file for bankruptcy, we find greater tolerance for earnings management after a bankruptcy experience.

The results are concentrated in settings where the director is an independent director and sits on the audit committee.

This suggests a shift in directors' risk-tolerance and deterioration in their monitoring incentives.

We find no evidence on the competing hypothesis of director distraction. Surviving a bankruptcy relatively unscathed lowers directors' perception of the severity of distress costs, with negative consequences for their monitoring over the financial reporting system.

How to join this seminar

This seminar is free to attend with no need to register in advance.

We welcome you to join us online on Wednesday 4 May 2022 at 2pm.

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Speaker bio

Professor Beatriz García Osma

Beatriz García Osma is Professor of Accounting at Universidad Carlos III de Madrid and Research Member at ECGI. She is a visiting professor at Stockholm School of Economics. Previously, she was an Associate Professor at Universidad Autónoma de Madrid.

She holds a PhD in Accounting & Finance from Lancaster University, where she was also a Marie Curie pre- and post-doctoral researcher.

Her research focuses on the links between financial reporting, corporate governance and capital markets.

Beatriz has published in national and international Journals, and participated and directed several research projects.

She was elected to represent Spain in the Board of the European Accounting Association (2014-2020), and also, as a member of the EAA Management Committee (2014-2017). She is the editor of the European Accounting Review (2020-2023) and a past editor of the Spanish Journal of Finance and Accounting. She belongs to several editorial boards of international journals.