The usefulness of financial accounting information: evidence from the field

Stefano Cascino, Mark Clatworthy, Beatriz García Osma, Joachim Gassen, Shahed Imam

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Abstract

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.
Original languageEnglish
Article number4
Pages (from-to)73-102
Number of pages30
JournalThe Accounting Review
Volume96
Issue number6
DOIs
Publication statusPublished - 17 Feb 2021

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