This study explores the role of interlocking directorships among Italian listed companies, by looking at their influence on earnings quality. Examining a sample of firms over the period 2000-2004, the author finds that the incidence of ID on BoD is negatively related to the value relevance and the persistence of accounting earnings. This suggests that ID weakens the level of BoD’s monitoring on financial reporting process, thus leading to a lower earnings quality. These findings contribute to the literature on the association between governance structures and accounting quality, at the same time providing evidence that could help regulators to further develop effective policy recommendations.
Keywords: Interlocking directorship, board of directors, Italy, earnings quality