Journal of Accounting and Economics Vol. 37 No. 3 2004
Board characteristics, accounting report integrity, and the cost of debt
Abstract
Creditor reliance on accounting-based debt covenants suggests that debtors are potentially concerned with board of director characteristics that influence the integrity of financial accounting reports. In a sample of S&P 500 firms, we find that the cost of debt is inversely related to board independence and board size. We also find that fully independent audit committees are associated with a significantly lower cost of debt financing. Similarly, yield spreads are also negatively related to audit committee size and meeting frequency. Overall, these results provide market-based evidence that boards and audit committees are important elements affecting the reliability of financial reports.
- DOI
- 10.1016/j.jacceco.2004.01.004
- Volume
- 37
- Issue
- 3
- Pages
- 315-342
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref