Busy CEOs and financial reporting quality: evidence from Indonesia

Abstract

Purpose

This study aims to examine the relationship between CEO busyness and financial reporting quality in a country which implements a two-tier board system.

Design/methodology/approach

This study includes firms listed on the Indonesian Stock Exchange during the 2010–2018 period. This study employs an ordinary least squares regression, the propensity score matching procedure, and a Heckman two-stage regression in testing the hypothesis.

Findings

This study finds that firms with busy directors have a higher financial reporting quality, and these results are robust to a battery or sensitivity analysis. The additional analyses also find that a busy CEO is negatively associated with the firm's financial reporting quality with decreasing income.

Practical implications

This paper provides implications for policy-makers in the emerging market on devising policies on CEOs' appointments, especially when involving multiple directorships. Despite the general belief on the detrimental workload effects of busy directors, this study offers evidence supporting the opposite effect.

Originality/value

As many previous studies focused on the effect of director busyness on firm’s performance, this study focusses on the effect of CEO busyness on financial reporting quality. To the best of our knowledge, this study is the first to investigate this issue in an emerging market.

Citation

Harymawan, I., Nasih, M., Rahayu, N.K., Kamarudin, K.A. and Wan Ismail, W.A. (2022), "Busy CEOs and financial reporting quality: evidence from Indonesia", Asian Review of Accounting, Vol. 30 No. 3, pp. 314-337. https://doi.org/10.1108/ARA-11-2021-0203