Universal Journal of Accounting and Finance Vol. 11(3), pp. 63 - 73
DOI: 10.13189/ujaf.2023.110302
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Managerial Opportunism in Fair Value Accounting: The Role of Board Composition

Carlotta D'Este ^1,*, Ilaria Galavotti ¹, Pier Luigi Marchini ², Anna Maria Fellegara ^1
1 Faculty of Economics and Law, Università Cattolica del Sacro Cuore, Italy
² Department of Economics and Management, Università degli Studi di Parma, Italy

ABSTRACT

This paper aims to explore the impact of corporate governance mechanisms on managerial opportunism in reporting unrealized gains and losses under fair value accounting. Building on the agency theory, we explore the relationship between the board of directors' composition and other comprehensive income (OCI) reporting choices. Based on previous findings, our conceptual model suggests that more effective boards could limit managers' accounting manipulation in OCI items reporting, through the exercise of stronger monitoring and advising functions. Using a sample of 54 Italian listed firms for the period 2009-2018, we provide evidence that while larger boards negatively affect OCI changes, gender board homophily exerts a positive effect on the magnitude of total OCI. Consistent with our predictions, our results therefore suggest that more diverse boards may hinder managerial ability to distort financial information to their advantage. Overall, our study contributes to the ongoing debate on fair value accounting on financial information usefulness, also adding to the literature on firms' transparency and corporate governance, confirming their mutually supporting role.

KEYWORDS
Fair Value, Corporate Governance, OCI Reporting, Board Diversity, Managerial Opportunism, Accounting Manipulation

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Carlotta D'Este , Ilaria Galavotti , Pier Luigi Marchini , Anna Maria Fellegara , "Managerial Opportunism in Fair Value Accounting: The Role of Board Composition," Universal Journal of Accounting and Finance, Vol. 11, No. 3, pp. 63 - 73, 2023. DOI: 10.13189/ujaf.2023.110302.

(b). APA Format:
Carlotta D'Este , Ilaria Galavotti , Pier Luigi Marchini , Anna Maria Fellegara (2023). Managerial Opportunism in Fair Value Accounting: The Role of Board Composition. Universal Journal of Accounting and Finance, 11(3), 63 - 73. DOI: 10.13189/ujaf.2023.110302.