4.2.1. Results Hypothesis 1—Board Independence

The panel regression analysis provides a significantly positive relation between the proportion of independent board members and earnings management, providing evidence that the occurrence of earnings management increases in line with the percentage of board independence. Thus, the results do not coincide with the hypothesis, nor the results of Beasley (1996), Dechow et al. (1996), Peasnell et al. (2005) and Klein (2002). Nevertheless, the result is of interest. The previously mentioned studies are all recognized and well-established in the earnings management literature, yet one could argue that firms, legislations and codes of best practices have changed since the studies were conducted. However, our finding is not strong, so our following comments could be related to the mere absence of a significant result of the hypothesis. Recent changes may imply that the current recommendations regarding independence could benefit from a reconsideration considering today's business environment and the experiences made during the recent decades. Moreover, looking beyond the earnings management literature, the findings may support Van den Berghe and Baelden (2005) argument that it may not be sufficient for good corporate governance to implement a formal standard on board independence alone. They argue that "soft" elements like character, attitude and independence of mind are equally important elements to the concept of independence6. Accordingly, as stated in the report of the Conference Board on Corporate Governance Best Practices, "directors must not only be independent according to evolving legislative and stock exchange listing standards, but also independent in thought and action—qualitative independent" (Brancato and Plath 2003).

<sup>6</sup> This argument was also brought to concern by Åse Aulie Michelet on NUES' 2017 annual debate for good corporate governance practices, arguing that for directors to truly be independent they must be able to promote and defend their own opinions (Bjørklund 2017).
