Managerial Ability and the Quality of Firms’ Information Environment

In this study, we examine the relation between managerial ability and the quality of a firm’s information environment. An emerging stream of research has identified managerial ability as an important determinant of accruals quality and management forecast quality. However, our understanding of the i...

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Veröffentlicht in:Journal of accounting, auditing & finance auditing & finance, 2018-10, Vol.33 (4), p.506-527
Hauptverfasser: Baik, Bok, Brockman, Paul A., Farber, David B., Lee, Sam (Sunghan)
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container_issue 4
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container_title Journal of accounting, auditing & finance
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creator Baik, Bok
Brockman, Paul A.
Farber, David B.
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description In this study, we examine the relation between managerial ability and the quality of a firm’s information environment. An emerging stream of research has identified managerial ability as an important determinant of accruals quality and management forecast quality. However, our understanding of the impact of managerial ability on a firm’s broader information environment is incomplete because it captures more than these specific financial reporting disclosures. Using a composite index based on various proxies for a firm’s information environment, we find a positive relation between managerial ability and a firm’s information environment. Consistent with our argument that managers’ equity incentives improve disclosure quality, we find that the quality of a firm’s information environment improves when managers have higher levels of equity incentives. We contribute to the literature by providing more complete and conclusive evidence about the impact of managerial ability on a firm’s broader information environment.
doi_str_mv 10.1177/0148558X17742820
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subjects Capital markets
Disclosure
Financial reporting
Information management
Managerial skills
Quality
title Managerial Ability and the Quality of Firms’ Information Environment
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