|
Accruals Quality, Firm Valuation and Audit Committee Accounting Expert Appointments
Vic Naiker,
University of Auckland
ABSTRACT. Prior research documents a contemporaneous positive association between accounting expertise in audit committees and financial reporting quality. This study employs the empirical setting of director appointments to the audit committee to provide evidence on the self-selection of accounting experts into firms with high financial reporting quality. Specifically, I find that firms which already have high financial reporting quality are more likely to appoint accounting experts to their audit committee. The results also indicate that the propensity of high quality firms to make such appointments is more pronounced when they are undervalued, underlining the use of accounting expert appointments as a signaling mechanism. Additional tests provide further support for the signaling motivation by documenting pronounced positive abnormal stock returns for undervalued firms with high financial reporting quality who appoint accounting experts.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|