Financial Reporting Quality of U.S. Private and Public Firms
University of Toronto - Rotman School of Management
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business
University of Toronto - Rotman School of Management; University of Toronto at Mississauga
December 14, 2012
The Accounting Review, September 2013
Rotman School of Management Working Paper No. 1995124
Using a new database that contains accounting data for a large sample of U.S. private firms, we provide an investigation of financial reporting quality (FRQ) of U.S. private versus public firms. We find that in general public firms have higher accrual quality and are more conservative. The results are consistent with public firms’ reporting reflecting greater demand for financial information. However, these reporting qualities of public firms are mitigated or eliminated in settings where public firms are more likely to manage earnings or face reduced demand for their financial information. Our study contributes not only to the current debate on private versus public financial accounting but also to the broader literature attempting to understand the determinants of FRQ.
Number of Pages in PDF File: 49
Keywords: Private firms, financial reporting quality, public versus private, demand, opportunism, mitigating factors
JEL Classification: M41, G30, M10
Date posted: January 30, 2012 ; Last revised: March 6, 2013
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