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Full-Text Articles in Business
Active Independent Directors And Earnings Quality, Yuanto Kusnadi, Bin Srinidhi
Active Independent Directors And Earnings Quality, Yuanto Kusnadi, Bin Srinidhi
Research Collection School Of Accountancy
We examine the relationship between active independent directors and earnings quality for U.S. firms. We construct measures that proxy for activeness of independent directors and find that the proportion of active independent directors is under half on average. Our finding shows that earnings quality increases with the percentage of active independent directors on the board. Once the active independent directors are separated out, the other independent directors do not have any effect on earnings quality. This finding supports the hypothesis that the activeness of independent directors is incrementally significant over just the proportion of independent directors for the quality of …
Cds Channels Of Influence On Discretionary Accruals, Hao Cheng, Kian Guan Lim
Cds Channels Of Influence On Discretionary Accruals, Hao Cheng, Kian Guan Lim
Research Collection Lee Kong Chian School Of Business
Existing studies indicated that firm debt holders can use the credit default swap (CDS) market to hedge their credit risk, and thus they would reduce their monitoring of the firms, leading to largely distressed firms shirking and increasing positive abnormal earnings accruals. Besides providing insurance, however, the CDS spreads also perform price discovery of credit risk information sought by trade creditors and potential lenders who are not protected. High absolute abnormal discretionary accruals or bad earnings quality, especially negative abnormal accruals, would lead adverse CDS price signals that are very costly to the firm. This compels the firm under nondistressed …
Impact Of Leverage On Financial Information Quality: International Evidence From The Hospitality Industry, Cédric Poretti, Alain Schatt, Tiphaine Jérôme
Impact Of Leverage On Financial Information Quality: International Evidence From The Hospitality Industry, Cédric Poretti, Alain Schatt, Tiphaine Jérôme
Journal of Hospitality Financial Management
Earnings are a key firm-performance yardstick for investors. The quality of earnings has fascinated researchers and investors alike, as it may be manipulated by a firm's management. This paper studies the relationship between earnings quality and debt levels of firms in the hospitality sector, using a sample of 642 firms from 26 countries for the 2002-2016 period. Results of this study suggests a generally positive relationship between a firm's leverage and its earnings quality in the hospitality sector, particularly for firms incorporated in countries with stronger investor protection. As such, some interesting implications of the leverage-earnings quality relationship are revealed …
Do Non-Staggered Board Elections Matter To Earnings Quality And The Value Relevance Of Earnings And Book Value?, Shuling Chiang, Gary Kleinman, Picheng Lee
Do Non-Staggered Board Elections Matter To Earnings Quality And The Value Relevance Of Earnings And Book Value?, Shuling Chiang, Gary Kleinman, Picheng Lee
Department of Accounting and Finance Faculty Scholarship and Creative Works
Purpose: The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach: The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings: The authors found that elections led to lower earnings quality, but better corporate governance led …
The Impact Of Related Party Sales By Listed Chinese Firms On Earnings Informativeness And Analysts Forecasts, Jiwei Wang, Hongqi Yuan
The Impact Of Related Party Sales By Listed Chinese Firms On Earnings Informativeness And Analysts Forecasts, Jiwei Wang, Hongqi Yuan
Research Collection School Of Accountancy
Using a random sample of 140 of China's listed firms, we show an adverse impact of related party (RP) sales of goods and services on the usefulness of accounting earnings to investors and on the quality of earnings forecasts by financial analysts. Consistent with the contention that RP sales may violate the arm's-length assumption of regular transactions and consequently impair the representational faithfulness and verifiability of accounting data, we find that earnings of firms engaged in RP sales are at least 33% less informative after controlling for factors known to affect earnings informativeness. We also find that financial analysts are …
Does Earnings Quality Affect Information Asymmetry? Evidence From Trading Costs, Nilabhra Bhattacharya, Hemang Desai, Kumar Venkataraman
Does Earnings Quality Affect Information Asymmetry? Evidence From Trading Costs, Nilabhra Bhattacharya, Hemang Desai, Kumar Venkataraman
Research Collection School Of Accountancy
Information asymmetry in financial markets relates to the idea that one party to a transaction has better information than the other. Since financial reporting involves the transmission of value-relevant enterprise information, we investigate whether the quality of reported earnings can contribute to differentially informed financial market participants. Higher information asymmetry is costly as it increases the adverse selection risk for market participants and lowers liquidity. For a large sample of NYSE and NASDAQ firms, we show that (i) poor earnings quality is significantly and incrementally associated with higher information asymmetry, (ii) earnings quality disproportionately affects information asymmetry for firms with …
Direct And Mediated Associations Among Earnings Quality, Information Asymmetry And The Cost Of Equity, Nilabhra Bhattacharya, Frank Ecker, Per Olsson, Katherine Schipper
Direct And Mediated Associations Among Earnings Quality, Information Asymmetry And The Cost Of Equity, Nilabhra Bhattacharya, Frank Ecker, Per Olsson, Katherine Schipper
Research Collection School Of Accountancy
Using path analysis, we investigate the direct and indirect links between three measures of earnings quality and the cost of equity. Our investigation is motivated by analytical models that specify both a direct link and an indirect link that is mediated by information asymmetry, but do not suggest which link would be more important empirically. We measure information asymmetry as both the adverse selection component of the bid-ask spread and the probability of informed trading (PIN). For a large sample of Value Line firms during 1993–2005, we find statistically reliable evidence of both a direct path from earnings quality to …
Why "Democracy" And "Drifter" Firms Can Have Abnormal Returns: The Joint Importance Of Corporate Governance And Abnormal Accruals In Separating Winners From Losers, Koon Boon Kee
Dissertations and Theses Collection (Open Access)
Do managers exercise accounting discretion in an opportunistic or efficient manner? Good governance structures, which mitigate agency costs, are necessary to ensure that the accounting information supplied by management is not opportunistically manipulated. The output of quality accounting information, in turn, serves as an input to better governance structures. Thus, governance and earnings quality (EQ) are inexorably linked through a complementarity relationship. This suggests two previously unexamined relationships. Firstly, the governance effects on performance in the influential paper by Gompers, Ishii and Metrick (2003) is overrated without good EQ, measured by the magnitude of abnormal accruals (AA), as an input. …
Legal Systems And Earnings Quality: The Role Of Auditor Industry Specialization, Chee Yeow Lim, Soo Young Kwon, Patricia Mui Siang Tan
Legal Systems And Earnings Quality: The Role Of Auditor Industry Specialization, Chee Yeow Lim, Soo Young Kwon, Patricia Mui Siang Tan
Research Collection School Of Accountancy
This paper extends prior studies in auditor industry specialization to an international setting and examines if the impact of industry specialist auditors on earnings quality is dependent on the legal environments. Using data for 28 countries over 20 industries from 1993 to 2003, we find that clients of industry specialist auditors have lower discretionary current accruals and higher earnings response coefficients than clients of nonspecialist auditors. In addition, we find that the impact of auditor industry specialization on earnings quality increases as the legal environment weakens. Collectively, the results suggest that the benefits from engaging the services of industry specialist …