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Managerial academic experience, external monitoring and financial reporting quality

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  • Zhiming Ma
  • Kirill E. Novoselov
  • Kaitang Zhou
  • Yi Zhou

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 earnings 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 a 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.

Suggested Citation

  • Zhiming Ma & Kirill E. Novoselov & Kaitang Zhou & Yi Zhou, 2019. "Managerial academic experience, external monitoring and financial reporting quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 46(7-8), pages 843-878, July.
    • Handle: RePEc:bla:jbfnac:v:46:y:2019:i:7-8:p:843-878
    DOI: 10.1111/jbfa.12398
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