Premium
Managerial academic experience, external monitoring and financial reporting quality
Author(s) -
Ma Zhiming,
Novoselov Kirill E.,
Zhou Kaitang,
Zhou Yi
Publication year - 2019
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12398
Subject(s) - endogeneity , instrumental variable , accrual , earnings management , propensity score matching , matching (statistics) , quality (philosophy) , business , accounting , variable (mathematics) , earnings , variables , actuarial science , finance , economics , econometrics , philosophy , statistics , mathematics , epistemology , machine learning , computer science , mathematical analysis
This study examines the effect of managerial academic experience on firms’ financial reporting quality. Using data from China, we find that firms with top managers possessing academic experience exhibit lower levels of both accrual and real earnings management, along with a lower probability of future restatements. This effect is more pronounced for firms with inefficient external monitoring, suggesting that the higher financial reporting quality is mainly explained by the managers’ intrinsic motivation to report truthfully. The results hold when we use firm fixed‐effect regressions, instrumental variable two‐stage regressions, and a propensity score matching (PSM) approach to mitigate the omitted variable and endogeneity concerns. Our study suggests that academic experience can serve as a source of valuable expertise for corporate executives.