The effect of audit committee financial expertise on earnings management tactics in the post-SOX era

IF 1.2 Q3 BUSINESS, FINANCE
Hui Xia (Harry) , Shu Lin , Shuo Li , Indranil Bardhan
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引用次数: 0

Abstract

To restore investor confidence and promote the integrity of financial accounting information provided to investors, following the passage of the Sarbanes-Oxley Act (SOX), the SEC adopted two new rules for public firms in early 2003, requiring the disclosure of audit committee financial expertise (ACFE) per SOX 407 and the reconciliation of non-GAAP financial measures to those most comparable in GAAP (Regulation G) per SOX 401(b). Using quarterly filing data in the post-SOX era from March 2003 to December 2016, this study examines the impact of these requirements, with a focus on the effect of ACFE on the main earnings manipulation tactics used to just meet or beat analyst expectations (JUSTMBE). Our study investigates the effects of overall ACFE and its components on three key earnings management tactics, namely, discretionary accruals, real activities management, and non-GAAP financial disclosures. We observe that firms with a higher level of ACFE, particularly accounting and finance expertise, exhibit a lower propensity to JUSTMBE. Furthermore, we posit that two upward earnings manipulations, accrual-based and real activities management, are significantly mitigated by ACFE through a complementary effect of its accounting and supervisory expertise components. However, we identify a clear strategic shift in which non-GAAP financial disclosures with unexpected exclusions become a popular alternative tactic for managers to JUSTMBE under the increasing presence of ACFE. This study provides empirical evidence with implications for regulators to consider more rigorous intervention and regulation on non-GAAP disclosures and to refine the requirement of audit committee financial experts with an emphasis on the complement of accounting and non-accounting financial expertise to effectively curtail earnings manipulation.

后 SOX 时代审计委员会财务专业知识对收益管理策略的影响
萨班斯-奥克斯利法案》(Sarbanes-Oxley Act,SOX)通过后,为了恢复投资者的信心并促进提供给投资者的财务会计信息的完整性,美国证券交易委员会于 2003 年初通过了两项针对上市公司的新规定,即根据 SOX 407 要求披露审计委员会的财务专业知识(ACFE),以及根据 SOX 401(b)要求将非 GAAP 财务指标与 GAAP 中最具可比性的指标(G 条例)进行调节。本研究利用后 SOX 时代(2003 年 3 月至 2016 年 12 月)的季度申报数据,研究了这些要求的影响,重点关注 ACFE 对主要盈利操纵策略的影响,这些策略被用来达到或超过分析师预期(JUSTMBE)。我们的研究调查了 ACFE 整体及其组成部分对三种主要盈利管理手段的影响,即酌定应计制、实际活动管理和非 GAAP 财务披露。我们发现,ACFE 水平较高的公司,尤其是会计和财务专业水平较高的公司,其 JUSTMBE 倾向较低。此外,我们还假设,ACFE 通过其会计和监管专长的互补效应,显著缓解了权责发生制和实际活动管理这两种向上的盈利操纵行为。然而,我们发现了一个明显的战略转变,即在 ACFE 不断加强的作用下,带有意外排除的非公认会计准则财务信息披露已成为管理者在 JUSTMBE 之外的另一种流行策略。本研究提供的经验证据对监管机构具有启示意义,即考虑对非美国通用会计准则的披露进行更严格的干预和监管,并完善对审计委员会财务专家的要求,强调会计和非会计财务专业知识的互补,以有效遏制盈利操纵行为。
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来源期刊
Advances in Accounting
Advances in Accounting BUSINESS, FINANCE-
CiteScore
2.50
自引率
6.20%
发文量
29
期刊介绍: Advances in Accounting, incorporating Advances in International Accounting continues to provide an important international forum for discourse among and between academic and practicing accountants on the issues of significance. Emphasis continues to be placed on original commentary, critical analysis and creative research.
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