Auditor characteristics and the pricing of discretionary accruals

Aguir, Wael; Asthana, Sharad; Liu, Linxiao

doi:10.1504/ijea.2013.059880

Cited by 2 publications

(2 citation statements)

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“…As there are many different definitions of financial reporting quality, we referred to the commonly accepted definition used by Jonas and Blanchet (2000): Financial reporting quality represents full and transparent financial information that is not designed to obfuscate or mislead users. We hand-collected two variables related to overlapping membership (i.e., the proportion of overlapping members and the existence of an independent financial expert as an overlapping member) and referred to the famous model by Kothari et al (2005) to measure discretionary accruals (DA) as a proxy for financial reporting quality (Aguir et al, 2013).…”

Section: Introductionmentioning

confidence: 99%

Do overlapping audit and compensation committee memberships contribute to better financial reporting quality? Empirical evidence for the German two-tier system

Velte

2017

IJEA

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Strengthening audit committee effectiveness is a key challenge from a research, regulation and corporate practice perspective. Audit committees' monitoring role in financial reporting is of great importance for shareholders and other stakeholder groups. This empirical-quantitative study examines overlapping membership in the audit and compensation committees and its impact on financial reporting quality. The analysis covers a sample of German firms listed on the 'DAX', 'TecDAX' and 'MDAX' for the business years 2010-2016 (426 firm-year observations). Correlation and regression analyses were conducted to evaluate the link between two overlapping variables and financial reporting quality. While the first overlapping variable (proportion of audit committee members who also sit on the compensation committee) contributes positively to accrual quality (as financial reporting quality), no significant results were found for the second overlapping variable (the existence of an independent financial expert as an overlapping member). The main result holds for robustness checks and has major implications in the German two-tier system.

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Section: Introductionmentioning

confidence: 99%