Meta-Analysis and the Accounting Literature: The Case of Audit Committee Independence and Financial Reporting Quality

38 Pages Posted: 10 Oct 2007

See all articles by Bradley Pomeroy

Bradley Pomeroy

University of Waterloo

Daniel B. Thornton

Smith School of Business at Queen's University

Abstract

We conduct a meta-analysis of the association between audit committee (AC) independence and financial reporting quality (FRQ). Although we cannot reliably aggregate results across studies in a statistical sense because of inconsistencies in defining FRQ and the absence of replication studies, quantitative review techniques yield three conclusions: (1) The use of different FRQ measures in the AC independence literature explains about half of the variation in results across studies. (2) Audit committees are more effective at enhancing audit quality (e.g., through averting going-concern reports and auditor resignations) than they are at fostering financial statement quality (e.g., by making high-quality accruals and avoiding restatements). AC independence can even reduce apparent financial statement quality by identifying the need for restatements and remedial, abnormal accruals. (3) Financial statement quality and audit quality are complementary contributors to FRQ. The statistical and methodological difficulties we encounter lead us to posit that the dearth of MA studies in accounting and auditing stems from similar difficulties in applying MA to other topics. We present evidence consistent with publication biases and perverse researcher incentives being responsible for the difficulties.

Keywords: Accounting research, meta-analysis, publication bias, audit committee independence, financial reporting quality

JEL Classification: M49, M41, M43, G34

Suggested Citation

Pomeroy, Bradley and Thornton, Daniel B., Meta-Analysis and the Accounting Literature: The Case of Audit Committee Independence and Financial Reporting Quality. European Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1020342

Bradley Pomeroy

University of Waterloo ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada

Daniel B. Thornton (Contact Author)

Smith School of Business at Queen's University ( email )

143 Union Street, #358
Kingston, Ontario K7L 3N6
Canada
613-328-5213 (Phone)
613-533-2321 (Fax)

HOME PAGE: http://smith.queensu.ca

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