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Audit quality, management ownership, and the informativeness of accounting earnings
journal contribution
posted on 2002-01-01, 00:00 authored by Ferdinand GulFerdinand Gul, S Lynn, J S L TsuiThis study has two primary objectives. First, it examines whether audit
quality moderates the association between informativeness of accounting earnings and management ownership. Second, it also examines whether audit quality moderates the negative association between management ownership and discretionary accruals. Using Australian data, it is shown that the positive relationship between returns-earnings association and management ownership is significantly weaker for firms with Big 6 auditors.Similarly, the negative association between management ownership and discretionary accruals is weaker for firms with Big 6 auditors. These results are consistent with the theory that higher quality audits can mitigate insiders' incentives to exploit accounting-based contractual constraints and manage earnings as a result of the separation of ownership and control.
quality moderates the association between informativeness of accounting earnings and management ownership. Second, it also examines whether audit quality moderates the negative association between management ownership and discretionary accruals. Using Australian data, it is shown that the positive relationship between returns-earnings association and management ownership is significantly weaker for firms with Big 6 auditors.Similarly, the negative association between management ownership and discretionary accruals is weaker for firms with Big 6 auditors. These results are consistent with the theory that higher quality audits can mitigate insiders' incentives to exploit accounting-based contractual constraints and manage earnings as a result of the separation of ownership and control.
History
Journal
Journal of accounting auditing and financeVolume
17Issue
1Pagination
25 - 49Publisher
SAGELocation
London, Eng.ISSN
0148-558XLanguage
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2002, SageUsage metrics
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