The initiation of audit committee interlocks and the contagion of accounting policy choices: evidence from special items

Ravi Dharwadkar, David Harris, Linna Shi, Nan Zhou

Research output: Contribution to journalArticle

Abstract

We document that the initiation of audit committee interlocks is associated with contagion in reported special items. We argue that this is, in part, attributable to contagion of accounting policy choices. We find that the special items of newly interlocked firms, unrelated before interlock, become positively correlated afterward, suggesting information transfer starts with interlock formation. This result holds for negative special items, key components of special items (asset impairments, restructuring costs, and gains/losses from asset sales), and is stronger for larger firms and for firms within the same industry.

Original languageEnglish (US)
Pages (from-to)120-158
Number of pages39
JournalReview of Accounting Studies
Volume25
Issue number1
DOIs
StatePublished - Mar 1 2020

Keywords

  • Audit committee interlock
  • Information transfer
  • Restructuring charges
  • SFAS 146
  • Special items

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)

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