Managerial Academic Experience, External Monitoring, and Financial Reporting Quality

Journal of Business Finance and Accounting, Forthcoming

49 Pages Posted: 10 Jul 2019

See all articles by Zhiming Ma

Zhiming Ma

Peking University

Kirill E. Novoselov

Shanghai University of Finance and Economics

Kaitang Zhou

School of Economics and Management, Wuhan University

Yi Zhou

Fudan University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2019

Abstract

This study examines the effect of managerial academic experience on firms’ financial reporting quality. Using data from China, we find that firms with top managers possessing academic experience exhibit lower levels of both accrual and real earning management, along with a lower probability of future restatements. This effect is more pronounced for firms with inefficient external monitoring, suggesting that the higher financial reporting quality is mainly explained by the managers’ intrinsic motivation to report truthfully. The results hold when we use firm fixed-effect regressions, instrumental variable two-stage regressions, and propensity score matching (PSM) approach to mitigate the omitted variable and endogeneity concerns. Our study suggests that academic experience can serve as a source of valuable expertise for corporate executives.

Keywords: academic experience; top management team; financial reporting quality; earnings management; expertise; external monitoring; imprinting; intrinsic motivation

JEL Classification: D83; J62; M41; M51

Suggested Citation

Ma, Zhiming and Novoselov, Kirill E. and Zhou, Kaitang and Zhou, Yi, Managerial Academic Experience, External Monitoring, and Financial Reporting Quality (July 2019). Journal of Business Finance and Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3415757

Zhiming Ma

Peking University ( email )

Department of Accounting
Guanghua School of Management
Beijing, 100871
China

Kirill E. Novoselov (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Kaitang Zhou

School of Economics and Management, Wuhan University ( email )

Wuhan, 430072
China

Yi Zhou

Fudan University ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

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