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The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis
Author(s) -
KARAMANOU IRENE,
VAFEAS NIKOS
Publication year - 2005
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2005.00177.x
Subject(s) - audit committee , corporate governance , accounting , business , audit , earnings , earnings management , empirical evidence , voluntary disclosure , finance , philosophy , epistemology
We study how corporate boards and audit committees are associated with voluntary financial disclosure practices, proxied here by management earnings forecasts. We find that in firms with more effective board and audit committee structures, managers are more likely to make or update an earnings forecast, and their forecast is less likely to be precise, it is more accurate, and it elicits a more favorable market response. Together, our empirical evidence is broadly consistent with the notion that effective corporate governance is associated with higher financial disclosure quality.