Abstract

http://ssrn.com/abstract=1942928
 
 

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Audit Committee Expertise and Financial Analysts’ and Investors’ Ability to Anticipate Future Earnings


John L. Abernathy


Kennesaw State University; Oklahoma State University - Stillwater - School of Accounting

Tony Kang


McMaster University - DeGroote School of Business

Gopal V. Krishnan


American University; American University - Kogod School of Business

October 11, 2011


Abstract:     
One of the important attributes of high quality accounting information is its ability to aid financial statement users in forming expectations about the firm’s future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher financial reporting quality. We extend the literature by examining the association between audit committee expertise and security analysts’ and investors’ ability to anticipate future earnings. We find that analyst earnings forecasts of firms with an audit committee member with accounting financial expertise are more accurate and less dispersed. These associations tend to be stronger in weaker governance firms. We also find that audit committee expertise is associated with a more informative stock price for firms weaker governance. We do not find a significant association between non-accounting financial expertise and attributes of analysts’ forecasts or earnings informativeness. These findings contribute to our understanding of the role of accounting expertise in audit committees.

Number of Pages in PDF File: 59

Keywords: Audit committees, Financial expertise, Analyst Forecasts, Corporate governance, Financial reporting quality

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Date posted: October 12, 2011  

Suggested Citation

Abernathy, John L. and Kang, Tony and Krishnan, Gopal V., Audit Committee Expertise and Financial Analysts’ and Investors’ Ability to Anticipate Future Earnings (October 11, 2011). Available at SSRN: http://ssrn.com/abstract=1942928 or http://dx.doi.org/10.2139/ssrn.1942928

Contact Information

John L. Abernathy (Contact Author)
Kennesaw State University ( email )
1000 Chastain Road
Kennesaw, GA 30144
United States
Oklahoma State University - Stillwater - School of Accounting ( email )
College of Business Administration
345 Business Building
Stillwater, OK 74078
United States
Tony Kang
McMaster University - DeGroote School of Business ( email )
1280 Main Street West
Hamilton, ON L8S 4M4
Canada
905-525-9140 x23846 (Phone)
905-521-8995 (Fax)
HOME PAGE: http://www.degroote.mcmaster.ca/profiles/tony-kang/
Gopal Krishnan
American University ( email )
4400 Massachusetts Ave, NW
Washington, DC 20016
United States
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20016
United States
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