TY - JOUR
T1 - The usefulness of financial accounting information
T2 - evidence from the field
AU - Cascino, Stefano
AU - Clatworthy, Mark
AU - García Osma, Beatriz
AU - Gassen, Joachim
AU - Imam, Shahed
PY - 2021/2/17
Y1 - 2021/2/17
N2 - We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers' earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers' earnings management incentives negatively affect investment professionals' assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals' assessments of accounting information usefulness, irrespective of preparers' corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals.
AB - We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers' earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers' earnings management incentives negatively affect investment professionals' assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals' assessments of accounting information usefulness, irrespective of preparers' corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals.
U2 - 10.2308/TAR-2019-1030
DO - 10.2308/TAR-2019-1030
M3 - Article
SN - 0001-4826
VL - 96
SP - 73
EP - 102
JO - The Accounting Review
JF - The Accounting Review
IS - 6
M1 - 4
ER -