Time：14:00-17:00 June 22

Venue：A305

Speaker：Xiaotao (Kelvin) Liu, Associate Professor, Northeastern University

Lecture：Faultlines among Senior Executives, Internal Control and Corporate Disclosure

Abstract

We investigate whether faultlines among senior executives influence corporate disclosure processes and outcomes. Faultlines are hypothetical dividing lines splitting a group into subgroups based on the simultaneous alignment or overlap of members’ characteristics (e.g., Lau and Murnighan 2005). Faultlines among senior executives are likely to create relational and task conflicts, impede information sharing and divert managerial attention from common-goal task to handling conflicts. Therefore, we hypothesize that faultlines compromise internal control and corporate disclosure quality. Following organizational and social psychology literature, we construct faultline measures based upon demographic characteristics such as age, gender, educational background, tenure, and expertise. Consistent with our hypothesis, we find that faultlines among senior executives are associated with increased material internal control weakness, 10-k filing delay, financial restatements, and management forecast errors. Implications for theory and practice are discussed.