Worldwide board reforms and financial reporting quality

This study assesses whether and how corporate board reforms affect firms’ financial reporting practices. Using a sample of 40 countries and employing a difference-in-differences design, we find that corporate board reforms reduce firms' real earnings manipulation and discretionary accruals. These results remain robust after addressing endogeneity concerns and conducting additional robustness tests. Further analyses show that the decrease in earnings management following board reforms is attributable to the mitigation of agency problems and information asymmetry. By shedding light on this mechanism, our paper contributes to the literature by demonstrating how board reforms can enhance firm value. [Display omitted] •We examine the impact of board reforms on financial reporting practices in 40 countries.•Board reforms are associated with lower accrual and real earnings management.•Effect is more pronounced for firms with more severe information asymmetry.•Effect is more pronounced for firms with more severe agency problem.•Effect is stronger for firms from countries with weaker institutional environments.