Managerial Ability and Earnings Quality

51 Pages Posted: 28 Jul 2010 Last revised: 12 Dec 2012

Peter R. Demerjian

University of Washington - Michael G. Foster School of Business

Melissa Fay Lewis-Western

Brigham Young University

Baruch Lev

New York University - Stern School of Business

Sarah E. McVay

University of Washington

Date Written: March 1, 2013

Abstract

We examine the relation between managerial ability and earnings quality. We find that earnings quality is positively associated with managerial ability. Specifically, more able managers are associated with fewer subsequent restatements, higher earnings and accruals persistence, lower errors in the bad debt provision, and higher quality accrual estimations. The results are consistent with the premise that managers can and do impact the quality of the judgments and estimates used to form earnings.

Keywords: Managerial ability, managerial efficiency, earnings quality, accruals quality

JEL Classification: M41

Suggested Citation

Demerjian, Peter R. and Lewis-Western, Melissa Fay and Lev, Baruch and McVay, Sarah E., Managerial Ability and Earnings Quality (March 1, 2013). Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1650309 or http://dx.doi.org/10.2139/ssrn.1650309

Peter R. Demerjian

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Melissa Fay Lewis-Western

Brigham Young University ( email )

Provo, UT 84602
United States
801-703-8426 (Phone)

Baruch Itamar Lev

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

Sarah E. McVay (Contact Author)

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States

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