DOCSLIB.ORG

Aspects of the Quality of Accounting in the International Context

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Aspects of the Quality of Accounting in the International Context REVISTA BRASILEIRA DE GESTÃO DE NEGÓCIOS ISSN 1806-4892 RBGN RevieW oF BUsiness Management e-ISSN 1983-0807 © FECAP 92 Aspectos da qualidade da informação Recebimento: 28/08/2016 contábil no contexto internacional Aprovação: 13/08/2017 Sady Mazzioni1 1Universidade Comunitária da Região de Chapecó, Programa de Editor responsável: Pós-Graduação em Ciências Contábeis e Administração, Chapecó, Brasil Prof. Dr. Ivam Ricardo Peleias Roberto Carlos Klann2 Avaliado pelo sistema: 2Universidade Regional de Blumenau, Programa de Pós-Graduação em Double Blind Review Ciências Contábeis, Blumenau, Brasil Resumo Objetivo – Analisar como as características do ambiente de negócios provocam diferenças na qualidade das informações contábeis no contexto internacional. Metodologia – Pesquisa descritiva com abordagem quantitativa. Coleta documental na base de dados Thomson Datastream Index Serviceem uma amostra de 1.406 empresas localizadas em 12 países, no período de 2005 a 2012. Resultados – As empresas localizadas em países com menor carga tributária, ambiente legal mais forte, maior índice de desenvolvimento econômico e financeiro, de origem legal common law e com maior grau de internacionalização apresentaram médias mais elevadas e com diferenças significativas no ranking agregado da qualidade da informação contábil. O tipo de padrão contábil utilizado também influenciou o posicionamento no ranking agregado da qualidade da informação contábil Contribuições – A interação das empresas com mercados externos provoca influência nas escolhas das políticas contábeis. As características ambientais dos países, relacionadas com a transparência, natureza econômica, ambiente legal e tributário, conduzem a níveis diferenciados na qualidade da informação contábil reportada pelas empresas. Palavras-chave – Qualidade dos Accruals. Persistência. Previsibilidade. Suavização. Revista Brasileira de Gestão e Negócios DOI: 10.7819/rbgn.v20i1.2630 92 Rev. Bras. Gest. Neg. São Paulo v.20 n.1 jan-mar. 2018 p.92-111 Aspectos da qualidade da informação contábil no contexto internacional 1 Introdução contábil (Barth et al., 2008; Daske, Hail, Leuz & Verdi, 2008), outras evidências sugerem que as A “qualidade dos lucros” ou, de modo normas têm um papel limitado para determinar mais geral, a qualidade dos relatórios financeiros a qualidade dos relatórios contábeis (Burgstahler, não tem uma definição precisa. A qualidade dos Hail & Leuz, 2006). relatórios financeiros pode ser definida como a As normas de contabilidade geralmente medida na qual os ganhos reportados representam concedem substancial flexibilidade para as fielmente a situação econômica subjacente e o grau empresas. As mensurações são muitas vezes em que os resultados apresentados refletem os baseadas em informações privadas e a aplicação conceitos básicos de contabilidade (Chen, Tang, das normas envolve julgamento. Gestores Jiang & Lin, 2010; Yoon, 2007). corporativos podem usar o poder discricionário Os Princípios Contábeis Geralmente nos relatórios para transmitir informações Aceitos foram submetidos constantemente à sobre o desempenho econômico da empresa, crítica, sendo considerados como um fator de mas também podem fazer uso indevido dos contribuição das falhas contábeis e dos negócios. critérios quando é de seu interesse. Por essa Os críticos argumentam que os padrões contábeis razão, os incentivos empresariais são suscetíveis são complexos e de difícil aplicação, resultando de desempenhar um papel fundamental na em um número crescente de republicações nos determinação da informatividade dos números últimos anos. Outros afirmam que os princípios contábeis reportados (Burgstahler et al., 2006). contábeis são excessivamente baseados em regras, As empresas são motivadas por contribuindo para a estruturação de transações determinados incentivos na divulgação dos que conduzem aos resultados desejados pelos números contábeis que exercem influência preparadores das demonstrações contábeis sobre a qualidade dos relatórios, a exemplo da (Kohlbeck & Warfield, 2010). concentração de propriedade (Barth et al., 2008; A qualidade da informação contábil é Chen et al.; 2010; Gaio, 2010; Isidro & Raonic, influenciada por diversos fatores regulatórios, 2012), da alavancagem financeira (Barth et al., como os padrões de contabilidade de elevada 2008; Kohlbeck & Warfield, 2010), da presença qualidade, com destaque para a adoção das IFRS em listagem estrangeira (Barth et al., 2008; Isidro (Barth, Landsman & Lang, 2008; Houqe, Van & Raonic, 2012), de seu desempenho econômico Zijl, Dunstan & Karim, 2012; Iatridis, 2010), a (Burgstahler et al., 2006; Iatridis, 2010), do origem do sistema legal do país (La Porta, Lopez- nível de desenvolvimento econômico do país De-Silanes & Shleifer, 2008; La Porta, Lopez- (Burgstahler et al., 2006; Gaio, 2010; Isidro & De-Silanes, Shleifer & Vishny, 1998; Soderstrom Raonic, 2012), do nível de desenvolvimento & Sun, 2007), a existência de leis para proteção financeiro do país (Gaio, 2010; Isidro & Raonic, do mercado de valores mobiliários e sua efetiva 2012) e do nível de combate à corrupção (La aplicação (Houqe et al., 2012), a proteção legal Porta et al., 1998), dentre outros incentivos dos interesses de acionistas minoritários (Houqe influenciadores. et al., 2012; La Porta et al., 1998), aplicação As empresas que têm operações efetiva das normas de contabilidade e auditoria diversificadas no exterior possuem maiores (Houqe et al., 2012), eficiência e integridade do incentivos para fornecer informação financeira ambiente legal sobre os negócios (La Porta et al.; abrangente para seus clientes estrangeiros, 1998; Houqe et al., 2012), a influência do sistema fornecedores e potenciais investidores (Isidro tributário na intensidade do alinhamento entre o & Raonic, 2012). Além disso, a concorrência lucro contábil e o lucro tributável (Houqe et al., internacional para o capital criou incentivos 2012; Soderstrom & Sun, 2007). para melhorar a qualidade e a comparabilidade Embora evidências empíricas demostrem da contabilidade (Land & Lang, 2002) e os que padrões de alta qualidade (por exemplo, investidores institucionais e estrangeiros preferem IFRS) geralmente melhoram a qualidade as demonstrações financeiras de alta qualidade 93 Rev. Bras. Gest. Neg. São Paulo v.20 n.1 jan-mar. 2018 p.92-111 Sady Mazzioni / Roberto Carlos Klann ao fazer investimentos internacionais (Bradshaw, qualidade pelo uso dos lucros divulgados e de Bushee & Miller, 2004). componentes dos lucros, definindo o constructo A partir desse contexto, a investigação como “qualidade dos lucros” ou “qualidade dos pretende responder ao seguinte problema de accruals” (Hribar, Kravet & Wilson, 2014). pesquisa: de que forma as características do As definições da qualidade dos lucros ambiente de negócios provocam diferenças incluem a elevada persistência dos lucros em na qualidade das informações contábeis no uma série temporal; lucros que representam com contexto internacional? O objetivo do estudo é precisão as implicações econômicas das operações analisar como as características do ambiente de subjacentes; a proporção de lucros em relação aos negócios provocam diferenças na qualidade das fluxos de caixa operacionais; accruals de capital informações contábeis no contexto internacional. de giro mapeados nos fluxos de caixa do passado, A justificativa do estudo está atrelada presente e futuro (McNichols, 2002). à contribuição prática dos resultados, que são Nesse sentido, esta investigação considera do interesse de profissionais como contadores, a qualidade da informação contábil a partir consultores, analistas de mercado, auditores, do ranking individual por empresa, composto responsáveis pela elaboração de normas contábeis por quatro atributos dos lucros baseados na e pesquisadores. Para as empresas, os resultados contabilidade: qualidade dos accruals, persistência, são importantes pela possibilidade de avaliar como previsibilidade e suavização dos lucros. a interação com mercados externos influencia nas escolhas das políticas contábeis, reforçando a 2.1 Qualidade dos accruals premissa de que a informação contábil de elevada Os accruals, ou as acumulações contábeis qualidade pode mitigar os problemas de agência por regime de competência, podem ser entendidos decorrentes da assimetria de informação entre como a diferença entre o lucro líquido e o fluxo de as empresas e os investidores (Ball, Kothari & caixa operacional líquido, ou seja, são constituídos Robin, 2000). pelos valores integrantes das contas de resultado O estudo apresenta evidências empíricas que entraram no cômputo do lucro, mas que não de que características ambientais de países implicam necessária movimentação de recursos distintos, relacionadas com a transparência, financeiros (Martinez, 2008). natureza econômica, ambiente legal e tributário, Os accruals refletem as escolhas para conduzem a níveis diferenciados na qualidade da fins de reporte, ao passo que os fluxos de caixa informação contábil reportada pelas empresas. refletem de modo mais fundamental perdas e 2 Revisão da literatura ganhos financeiros. Os accruals e a qualidade dos lucros estão relacionados e as mudanças A qualidade da informação contábil é difícil transitórias no fluxo de caixa operacional ocorrem de ser observada e, como consequência, é difícil de pela manipulação gerencial provocada na variação ser mensurada (Isidro & Raonic, 2012). Não há dos itens de capital de giro ao longo do tempo, uma concordância ou abordagem predominante, conduzindo para ganhos de menor qualidade (Ball geralmente aceita
Load more

Recommended publications
  • Line-Item Analysis of Earnings Quality Contents
    Foundations and TrendsR in Accounting Vol. 3, Nos. 2–3 (2008) 87–221 c 2009 N. D. Melumad and D. Nissim DOI: 10.1561/1400000010 Line-Item Analysis of Earnings Quality By Nahum D. Melumad and Doron Nissim Contents 1 Introduction 88 2 Overview of Earnings Quality 91 3 Overview of Earnings Management 96 4 Revenue 107 5 Accounts Receivable 124 6 Inventory 131 7 Property, Plant and Equipment 142 8 Intangible Assets 153 9 Investments in Debt Securities 160 10 Debt 164 11 Leases 168 12 Income Taxes 172 13 Pension and Other Post-Retirement Benefits 179 14 Contingencies 184 15 Other Liabilities 187 16 Derivatives 190 17 Investment in Equity Securities and Variable Interest Entities 195 18 Shareholders’ Equity 203 19 Concluding Comments 213 References 214 Foundations and TrendsR in Accounting Vol. 3, Nos. 2–3 (2008) 87–221 c 2009 N. D. Melumad and D. Nissim DOI: 10.1561/1400000010 Line-Item Analysis of Earnings Quality∗ Nahum D. Melumad1 and Doron Nissim2 1 Columbia Business School, Columbia University, New York, NY 10027, USA, [email protected] 2 Columbia Business School, Columbia University, New York, NY 10027, USA, [email protected] Abstract In this paper, we discuss earnings quality and the related concept of earnings management, focusing on the primary financial accounts. For each key line-item from the financial statements, we summarize accounting and economic considerations applicable to that item, dis- cuss implications for earnings quality, evaluate the susceptibility of the item to manipulation, and identify potential red flags. The red flags and specific issues discussed for the individual line-items provide a frame- work for fundamental and contextual analysis by academic researchers and practitioners.
    [Show full text]
  • Accounting Consistency and Earnings Quality†
    Accounting consistency and earnings quality† Kyle Peterson University of Oregon [email protected] Roy Schmardebeck University of Arkansas [email protected] T. Jeffrey Wilks Brigham Young University [email protected] August 2013 Abstract: We specify measures of accounting consistency based on the textual similarity of accounting policy footnotes both across time and within industry and we examine how these measures relate to earnings quality. Consistency over time is positively associated with earnings quality, as proxied by earnings persistence, predictability, smoothness, accrual quality, and absolute discretionary accruals. We also find a positive association between accounting consistency within industry and accrual quality and absolute discretionary accruals proxies, but this positive association stems from measurement error in the earnings quality proxies. Our results suggest that accounting consistency is an important factor in the measurement of earnings quality. JEL classification: M41 Keywords: accounting policies, comparability, consistency, earnings quality, accrual estimation, accrual quality † We appreciate the helpful comments of Bob Bowen, Cory Cassell, Michael Drake, Adam Esplin, Dave Folsom, Steve Matsunaga, Rick Mergenthaler, Ken Merkley, James Myers, Linda Myers, Gary Taylor, Jenny Tucker, Rodrigo Verdi, Peter Wilson, and workshop and conference participants at the Brigham Young University Accounting Symposium, the 2010 UBCOW Conference, the 2011 AAA Annual Meeting, and the University of Arkansas. 1. Introduction Earnings quality is a frequently studied, albeit elusive, construct in accounting research. The large surge of research on earnings quality has prompted some recent reflection about what earnings quality is and the importance of measurement in this research. Dechow et al. (2010) note that various proxies are used for earnings quality and that each of these proxies capture different aspects of quality.
    [Show full text]
  • Financial Accounting & Reporting I
    Financial Accounting & Reporting I Spring 2021 (ACCTNG3401-001) Syllabus About the Instructor Dr. Jennifer (He) Wen Phone:314-516-7187 Email: [email protected] Campus office: 210 Anheuser-Busch Hall Virtual Office Hours: Thursday 8-9pm or by appointment In-Person Office Hours: To be determined Welcome to ACCTNG 3401! This is a one semester course that advance your knowledge about financial accounting. You may have heard “Accounting is the language of business”. In this course, you will strengthen your mastery of the fundamental concepts of this language and the preparation process of financial statements. Building on your knowledge of the fundamentals, this course introduces you to in-depth discussion of financial accounting focusing on the perspective of preparers of financial reports. You will not only learn about the accounting methods for the accounting items covered this class and prepare the reporting of these items, but also analyze how different methods affect financial statements differently. Thus, this class will be the foundation for all your other upper- level accounting classes. Becoming a fluent speaker of a new language requires commitment of time and efforts. This course is very rigorous. You will want to devote a couple of blocks of time (8-9 hours in total per week) to read the material and complete online activities and homework. To optimize knowledge retention and your performance in the class, it is recommended that you study in a period of about a couple of hours each time for several days a week. Please avoid spending all the hours once in a week. To commit yourself to make time to study several times per week, it also requires a lot self-discipline.
    [Show full text]
  • Earnings Quality White Paper
    Corporate Earnings: It’s not just a question of quantity September 30, 2007 Introduction outline the findings of our own research and illustrate They say beauty is only skin-deep. Investors would be how we have incorporated earnings quality analysis into wise to remember this aphorism when choosing stocks our investment process. since a company’s stated earnings, though eagerly watched by the market, are only ink-deep. To truly un- Background derstand a firm’s financial situation, it is important to The success Smith Group has achieved over the years consider the quality of a firm’s earnings, not just the is attributable to our ability to control portfolio risk and quantity. invest in companies whose earnings grow faster than the market expects. Because reported earnings are so The Basics... important to our process, and because managements have so many accounting tools available to them to Understanding the quality of earnings is important to forecasting the quantity and credibility of fu- manipulate earnings, it is important that we assess the ture earnings. credibility of earnings for every company we invest in our clients’ portfolios. Level of accruals, operating margins, asset turnover and expense exclusions are significant indicators of the degree of earnings quality. The foundations of our earnings quality model rest on a large array of research generated both externally and Earnings quality measures differ by industry, making internally. We have studied numerous academic papers customization of rankings models necessary. from some of the leading minds in the field. The out- Companies with high earnings quality have a come of this review was a confirmation of the primary higher likelihood of reporting positive earnings measures that we already use, but with some enhance- surprises in the future.
    [Show full text]
  • Earnings Quality Full Text Available At
    Full text available at: http://dx.doi.org/10.1561/1400000004 Earnings Quality Full text available at: http://dx.doi.org/10.1561/1400000004 Earnings Quality Jennifer Francis Duke University Durham, NC USA [email protected] Per Olsson Duke University Durham, NC USA [email protected] Katherine Schipper Duke University Durham, NC USA [email protected] Boston – Delft Full text available at: http://dx.doi.org/10.1561/1400000004 Foundations and Trends R in Accounting Published, sold and distributed by: now Publishers Inc. PO Box 1024 Hanover, MA 02339 USA Tel. +1-781-985-4510 www.nowpublishers.com [email protected] Outside North America: now Publishers Inc. PO Box 179 2600 AD Delft The Netherlands Tel. +31-6-51115274 The preferred citation for this publication is J. Francis, P. Olsson and K. Schipper, Earnings Quality, Foundation and Trends R in Accounting, vol 1, no 4, pp 259–340, 2006 ISBN: 978-1-60198-114-1 c 2008 J. Francis, P. Olsson and K. Schipper All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, mechanical, photocopying, recording or otherwise, without prior written permission of the publishers. Photocopying. In the USA: This journal is registered at the Copyright Clearance Cen- ter, Inc., 222 Rosewood Drive, Danvers, MA 01923. Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by now Publishers Inc for users registered with the Copyright Clearance Center (CCC). The ‘services’ for users can be found on the internet at: www.copyright.com For those organizations that have been granted a photocopy license, a separate system of payment has been arranged.
    [Show full text]
  • Earnings Quality As Measured by Predictability of Reported Earnings
    Holt Advances in Business Research 2013, Vol. 4, No. 1, 49-5343-48 Earnings Quality As Measured By Predictability of Reported Earnings Paul Holt, Texas A&M University, Kingsville The study selected a single normative criterion related to earnings quality, that current and prior years’ earnings per share (eps) should be reasonable predictors of future eps. Correlations between one year’s eps and the following year’s eps were sometimes much higher than expected. A surprise was that the second prior year’s eps was a slightly better predictor of the current year’s eps than the immediate prior year. Performing multivariate regressions with an additional prior year dependent variable provides an improvement in the residual sum of squares (two independent variables predict better than three, etc). But with the addition of each additional prior year the percentage improvement in the residual sum of squares declines. Further, starting with the sixth prior year, adding an additional dependent variable makes no noticeable impact on prediction. The quality of earnings is a concept that has received much attention in recent years by accountants and users of financial statements. It is clearly an important concept, yet there is no precise definition of the term. More precisely, there are many definitions, but none that is universally accepted. Earnings quality can be reduced by errors and by management manipulation. Aside from honest errors, reported earnings can be manipulated by recording revenues too early or too late, a violation of the recognition principle, and by recording expenses too early or too late, a violation of the matching principle.
    [Show full text]
  • The Relationship Between Earnings Quality and Audit Quality: an Iranian Angle
    Journal homepage: https://ijaaf.um.ac.ir DOI: 10.22067/ijaaf.2020.39281 Research Article The Relationship between Earnings Quality and Audit Quality: An Iranian Angle Mohammad Seddigh Ansari Qeshmi* Economics and Administrative Sciences, Payamenoor University, Tehran, Iran Hamideh Nazaridavaji Faculty of Economics and Administrative sciences, Ferdowsi University of Mashhad, Mashhad, Iran Abstract The present study is concerned about the relationship between earnings quality and audit quality of audit firms to figure out whether the earnings quality of firms audited by larger audit firms is more than that of the smaller firms or the earnings quality of firms audited by longer tenure audit firms is more than that of the shorter tenure firms or not. The study's hypotheses were tested using a sample of 129 year-company listed on the Tehran Stock Exchange during 2012-2016 and by using the multiple regression pattern based on the data integration technique. Hence, the multivariable regression model is used for testing the hypotheses. The obtained results show that the earnings quality of firms audited by small audit firms outweighs that of the large audit firms. Moreover, the findings indicate that those firms audited by longer tenure audit firms, compared with those audited by shorter tenure audit firms, enjoy a better earnings quality. Keywords: Earnings Quality, Audit Firms’ Tenure, Mandatory Rotation, Audit Quality. *Corresponding Author: Department of Accounting, Email: [email protected] 1. Introduction Iranian An audit firm's income is one of the items of financial statements that are of great Journal of importance for all users. According to declaration No. 1 of financial accounting concepts, Accounting, financial reports are on firm performance information, presented through earnings Auditing & calculation and its constituent components.
    [Show full text]
  • Smoothness, Earnings Surprise and Stock Price Informativeness
    International Journal of Academic Research in Accounting, Finance and Management Sciences Vol. 4, No.2, April 2014, pp. 385–394 E-ISSN: 2225-8329, P-ISSN: 2308-0337 © 2014 HRMARS www.hrmars.com Smoothness, Earnings Surprise and Stock Price Informativeness. Evidence from Indian Stock Market Gregory D. LYIMO Birla Institute of Management Technology, Plot No. 5, Knowledge Park, Greater Noida (NCR) Uttar Pradesh - 201 306 The Institute of Finance Management (IFM) Shaaban Robert Street, P.O.BOX 3918, Dar es salaam, Tanzania, E-mail: [email protected] Abstract We examine the relationship between stock price synchronicity and earnings quality. We specifically used earning surprise and smoothness as proxy of earnings quality. Data were collected from companies listed in Bombay stock exchange in BSE 500. Our sample period ranges from 2006 to 2012. We employed panel data regression model using pooled OLS with standard error robust. We find that there is significant negative relationship between earnings surprise and stock price synchronicity. This finding is indicates that earnings surprise improves stock price informativeness. Finally, we find that there is no significance relationship between smoothness and stock price synchronicity. Therefore, smoothness of earnings does not influence stock price informativeness. The present study adds to new insight of the relationship between stock price informativeness and earnings quality proxies from emerging market particular India. Key words Earnings quality, earnings surprise, stock price synchronicity, stock price informativeness DOI: 10.6007/IJARAFMS/v4-i2/936 URL: http://dx.doi.org/10.6007/IJARAFMS/v4-i2/936 1. Introduction During recent years, the importance of improving informativeness of stock price so as to improve resources allocation have emerged issues of concern to researchers and other market participants (Durnev et al., 2004; Piotroski and Roulstone 2004; Jing 2007; and Johnston 2009).
    [Show full text]
  • “Audit Adjustments and Earnings Quality”
    Distinguished Lecture Series School of Accountancy W. P. Carey School of Business Arizona State University Clive Lennox of Nanyang Technological University will present “Audit adjustments and earnings quality” on November 13, 2013 1:30pm in MCRD456 Audit adjustments and earnings quality * Clive Lennox Nanyang Technological University Xi Wu Central University of Finance and Economics Tianyu Zhang The Chinese University of Hong Kong * This paper has benefited from the comments of Miao Bin, Robert Knechel, Huai Zhang, and seminar participants at Nanyang Technological University. Xi Wu thanks the Inspection Bureau of the Chinese Ministry of Finance for providing data support. Clive Lennox thanks Nanyang Technological University for providing research funding (New Silk Road grant number M5801003). Audit adjustments and earnings quality Abstract: While there are many alternative proxies for “earnings quality”, there is little evidence as to what auditors consider to be indicative of high earnings quality. To answer this, we examine the adjustments that auditors require companies to make to earnings during year-end audits. There are three findings. First, audit adjustments serve to increase earnings persistence, smoothness, and accrual quality. This is consistent with auditors helping to make earnings more useful for the purposes of valuation. Second, audit adjustments have a larger effect on signed accruals than absolute accruals. Third, audit adjustments have no effect on the discontinuity in the earnings distribution around zero. These findings should prove useful to future researchers intending to use earnings quality metrics as proxies for audit quality. 1. Introduction Earnings quality has been measured using various earnings attributes such as persistence, smoothness, accrual quality, signed accruals, absolute accruals, and benchmark beating.
    [Show full text]
  • The Influence of Firm's Fair Value System on Earnings Quality Under
    The Journal of Applied Business Research – May/June 2018 Volume 34, Number 3 The Influence Of Firm’s Fair Value System On Earnings Quality Under IFRS Chang Seop Rhee, Sejong University, South Korea Eun Sil Choi, Korea University, South Korea Ji Yeon Ryu, Korea University, South Korea ABSTRACT This paper analyzes the influence of firms’ fair value system on earnings quality under IFRS. Korean firms are required to adopt IFRS in 2011. IFRS adoption was expected to increase value relevance of book value of equity and benefit information users’ decision making. However, prior Korean studies report that value relevance of book value of equity is indifferent between under K-GAAP and IFRS. We consider that the indifference in value relevance of book value of equity after IFRS adoption is due to different level of fair value system among firms. We investigate whether the different level of fair value system among firms lead to the difference in earnings quality. Furthermore, we examine how each firm’s fair value system affect earnings quality under IFRS. This study finds following results. First, firms with weak fair value system smooth income more frequently. Second, firms with weak fair value system experience small amount of positive profit and slight increase in net income compared to prior period more frequently. Third, firms with weak fair value system make less timely loss recognition. Lastly, book value of equity and goodwill has low relative value relevance for weak fair value systemic firms, while both book value of equity and goodwill have incremental value relevance for firms with strong fair value evaluation system.
    [Show full text]
  • Earnings Quality.Pdf
    Earnings Quality Ilia Dichev Goizueta Business School, Emory University John Graham Campbell R. Harvey Fuqua School of Business, Duke University National Bureau of Economic Research Shiva Rajgopal Goizueta Business School, Emory University Preliminary and incomplete Please do not quote or distribute without permission Comments welcome February 27, 2012 Abstract: We provide new insights into earnings quality via a survey 169 CFOs of public companies and 12 in- depth interviews of Chief Financial Officers (CFOs) and two standard setters. Our key findings are: (i) high quality earnings reflect consistent reporting choices over time, avoid long term estimates, and are sustainable; (ii) about 50% of earnings quality is driven by innate factors; (iii) about 20% of firms manage earnings to misrepresent economic performance and for such firms, 10% of EPS is typically thus managed; (iv) CFOs believe that earnings management is hard to unravel from the outside but suggest numerous red flags that academics can use to identify managed earnings; and (v) CFOs disagree with the direction the FASB is headed on a number of issues including the sheer number of rules promulgated, the top-down as opposed to the bottom-up approach to rule making, curtailed reporting discretion, de- emphasis of the matching principle, and the over-emphasis on fair value accounting. We acknowledge excellent research assistance by Mengyao Cheng, Jivas Chakravarthy and Stephen Deason. We appreciate comments on an earlier version of the paper from workshop participants at Texas
    [Show full text]
  • The Quality of Accounting Information in Politically Connected Firms Paul K
    Purdue University Purdue e-Pubs Purdue CIBER Working Papers Krannert Graduate School of Management 1-1-2007 The Quality of Accounting Information in Politically Connected Firms Paul K. Chaney Vanderbilt University Mara Faccio Purdue University David Parsley Vanderbilt University Follow this and additional works at: http://docs.lib.purdue.edu/ciberwp Chaney, Paul K.; Faccio, Mara; and Parsley, David, "The Quality of Accounting Information in Politically Connected Firms" (2007). Purdue CIBER Working Papers. Paper 53. http://docs.lib.purdue.edu/ciberwp/53 This document has been made available through Purdue e-Pubs, a service of the Purdue University Libraries. Please contact [email protected] for additional information. The Quality of Accounting Information in Politically Connected Firms Paul Chaney Vanderbilt University Mara Faccio Purdue University David Parsley Vanderbilt University 2007­008 The Quality of Accounting Information in Politically Connected Firms PAUL K. CHANEY, MARA FACCIO, AND DAVID C. PARSLEY * Recent studies have documented systematic exchanges of favors between politicians and firms, and that connected firms, on average gain from political ties. Since these ties are often to a top manager or large shareholder, agency problems are likely more severe for politically connected firms. Moreover, in the case of political ties, the costs of lower quality disclosures may be mitigated. Empirically, we find that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non­connected companies. Additionally, among connected firms, those that have stronger political ties have the poorest accruals quality. This evidence suggests that managers of connected firms appear to be less sensitive to market pressures to increase the quality of information.
    [Show full text]