SEMINAR SERIES No. 15/1314
Desautels Faculty of Management
McGill University, Canada
Corporate boards of directors are expected to oversee managers but research shows that this oversight is imperfect. This study investigates whether outside directors are aware of financial frauds. To do so, our analysis focuses on the abnormal turnover of these directors during the period before frauds are discovered and before lawsuits are filed. Given that outside directors are subject to various forms of reputational penalties if a fraud is discovered, we hypothesize that outside directors are more likely to leave their firms, provided they are able to detect the fraud. Our empirical analysis shows that, during the fraud committing period, outside directors in fraud firms exhibit an abnormal level of turnover. We further examine the characteristics of outside directors and boards at these fraud firms and find that directors who are female and those who have greater stock ownership in the firm and multiple directorships at other firms are more likely to leave fraud firms. We also show that board size and the number of meetings are related to abnormal turnover in fraud firms during the fraud committing period.
Date: June 24, 2014 (Tuesday)
A Short Biography of Prof. Desmond Tsang
Prof. Tsang began his career in the auditing department at Deloitte and Touche in Hong Kong and later worked as an economist at the Ontario Ministry of Finance in Canada. Subsequently he pursued his PhD studies at the University of California at Berkeley, majoring in accounting and real estate. His research interests in accounting include Earnings Management; Performance Measurement; IFRS & Accounting Fraud. His research in the area of real estate specializes in the financial reporting issues of Real Estate Investment Trusts, and on Corporate Governance and International Real Estate. Prof. Tsang has published in both accounting and real estate journals, including top-tier journals such as Real Estate Economics, Journal of Real Estate Research andJournal of Real Estate Finance and Economics. He has presented his research findings at conferences in the US, Europe and Asia and has received several best paper awards at these conferences.
Prof. Tsang is a Certified Public Accountant (CPA) in the US and a Chartered Financial Analyst (CFA). He teaches Intermediate Financial Accounting I & Financial Statement Analysis at the undergraduate level and Intermediate Financial Reporting I at the MBA level. He was nominated for the Principal’s Prize for Excellence in Teaching at the university level in 2009. He was the recipient of the Desautels Faculty of Management Distinguished Teaching Award in 2010. Recently, he was chosen by students of the Management Undergraduate Society as the Professor of the Year 2012.