Do financial expert directors affect the incidence of accruals management to meet or beat analyst forecasts?

Evidence that firms adjust accruals to meet or beat analyst forecasts is pervasive. However, the implications for earnings quality are not clear. Managers can use this practice to mislead investors or to signal future earnings growth. Assuming boards are concerned about providing higher quality fina...

Full description

Saved in:
Bibliographic Details
Published in:Asia-Pacific journal of accounting & economics 2015-10, Vol.22 (4), p.406-427
Main Author: Hsu, Pei Hui
Format: Article
Language:English
Subjects:
Accruals
analyst forecasts
board of director
Corporate governance
Correlation analysis
Earnings management
financial experts
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Evidence that firms adjust accruals to meet or beat analyst forecasts is pervasive. However, the implications for earnings quality are not clear. Managers can use this practice to mislead investors or to signal future earnings growth. Assuming boards are concerned about providing higher quality financial information, they should discourage managers from adjusting earnings to beat the target if adjustment diminishes earnings quality. Consistent with this prediction, I find a significantly negative relation between the probability that a firm beats the target by adjusting accruals and the presence of independent audit committee financial expert for firms with poor future performance.
ISSN:1608-1625
2164-2257
DOI:10.1080/16081625.2014.998244