Date of Award

Spring 4-22-2019

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Accountancy

First Advisor

Dr. Matthew D. DeAngelis

Second Advisor

Dr. Douglas E. Stevens

Third Advisor

Dr. S. Sean Cao

Fourth Advisor

Dr. James R. (“Robbie”) Moon

Abstract

Personal political ideology can be a source of inter-personal frictions and affect working relationships. In this study, I introduce the construct of firm-level Political Ideological Divergence at the Top (PID) – the difference in the personal political ideologies of the CEO and that of the board of directors – and examine the impact that PID has on a firm’s reporting quality. My results suggest that PID increases the level of monitoring that the board of directors impose on the CEO and improve financial reporting quality. In-depth analysis reveals PID between the CEO and non-executive directors can improve financial reporting quality while PID between the CEO and the independent chairman can sometimes lead to reduced financial reporting quality. I also find that PID is associated with an increase in the CEO’s donations to individuals and organizations that are not aligned with her political ideology during her tenure. Lastly, I find evidence that suggests firms with higher levels of PID have earnings announcements that are more informative and management earnings forecasts that are more credible. This study documents the first evidence that differences in personal beliefs of the CEO and the personal beliefs of directors can affect firm behavior, and that CEOs may actively take steps to mitigate such differences.

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