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Co‐opted Boards and the Obfuscation of Financial Reports
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Tanveer Hussain,
Geofry Areneke,
Jacob Agyemang
Abacus
Swansea University Author:
Tunyi Tunyi Abongeh
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© 2025 The Author(s). Abacus published by John Wiley & Sons Australia, Ltd on behalf of Accounting Foundation, The University of Sydney. This is an open access article under the terms of the Creative Commons Attribution License (CC BY).
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DOI (Published version): 10.1111/abac.12366
Abstract
This study investigates the relationship between board co-option and the obfuscation of financial disclosures in a comprehensive sample of 9,620 10-K filings by 1,076 US-listed firms between 1996 and 2018. Our empirical results are consistent with our hypotheses that board co-option partly explains...
| Published in: | Abacus |
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| ISSN: | 0001-3072 1467-6281 |
| Published: |
Wiley
2025
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa67607 |
| Abstract: |
This study investigates the relationship between board co-option and the obfuscation of financial disclosures in a comprehensive sample of 9,620 10-K filings by 1,076 US-listed firms between 1996 and 2018. Our empirical results are consistent with our hypotheses that board co-option partly explains the obfuscation of financial reports. Ex-post tests reveal that the co-option effect is most pronounced in firms led by less able managers and is attenuated in the presence of a female CEO. Our findings are consistent with a stakeholder-agency perspective as they suggest that board capture weakens the ability of directors to discharge their fiduciary duties, particularly the provision of readable financial statements to stakeholders. Our results are robust to the use of alternative co-option measures, obfuscation metrics, model specifications, and potential endogeneity concerns. Overall, we contribute to the growing literature on financial statement readability by underscoring the critical role of effective monitoring in shaping the quality of firms’ communication with stakeholders. Our results have important implications for governance regulation and policy. |
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| Keywords: |
Board co-option; Board monitoring; Corporate governance; Female CEOs; Financial statement readability; Managerial ability; Obfuscation |
| College: |
Faculty of Humanities and Social Sciences |
| Funders: |
Swansea University |