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

Pei Hui Hsu

Asia-Pacific Journal of Accounting & Economics, 2015, vol. 22, issue 4, 406-427

Abstract: 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.

Date: 2015
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DOI: 10.1080/16081625.2014.998244

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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