The Link Between Earnings Conservatism and Board Composition.

Evidence From The UK.

W. Beekes, P. Pope and S. Young

Lancaster University Working Paper

ABSTRACT

This paper examines whether accounting quality, proxied by the timeliness and

conservatism in reported earnings, depends upon board composition. We focus upon

the use of outside directors to signal board quality and effective monitoring. Results

indicate that firms with a higher proportion of non-executive directors are more likely to

recognise bad news in earnings on a timely basis. Boards with lower levels of outsider

representation are found to have lesser conservative tendencies, particularly with regard

to good news. Our results appear to suggest that board composition is a key factor in

determining the accounting quality of UK firms reported earnings.

Address for correspondence: W. Beekes, Dept of Accounting and Finance, Lancaster UniversityManagement School, Lancaster, LA1 4YX.Email: w.beekes@lancaster.ac.uk Tel: 01524 593623