IDEAS home Printed from https://ideas.repec.org/a/eee/jaecon/v64y2017i1p123-149.html
   My bibliography  Save this article

Employee quality and financial reporting outcomes

Author

Listed:
  • Call, Andrew C.
  • Campbell, John L.
  • Dhaliwal, Dan S.
  • Moon, James R.

Abstract

We examine the association between employee quality and financial reporting outcomes. Using the average workforce education level in MSA(s) where the firm operates as a proxy for employee quality, we find that firms with a high-quality workforce exhibit higher accruals quality, fewer internal control violations, and fewer restatements. These firms also issue superior management forecasts, in terms of frequency, timeliness, accuracy, precision, and bias. Employees located at the firm's headquarters primarily drive our findings. Our evidence suggests employee quality, particularly at a firm's headquarters, is associated with both mandatory and voluntary disclosure quality.

Suggested Citation

  • Call, Andrew C. & Campbell, John L. & Dhaliwal, Dan S. & Moon, James R., 2017. "Employee quality and financial reporting outcomes," Journal of Accounting and Economics, Elsevier, vol. 64(1), pages 123-149.
    • Handle: RePEc:eee:jaecon:v:64:y:2017:i:1:p:123-149
    DOI: 10.1016/j.jacceco.2017.06.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165410117300356
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jacceco.2017.06.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Feng, Mei & Ge, Weili & Luo, Shuqing & Shevlin, Terry, 2011. "Why do CFOs become involved in material accounting manipulations?," Journal of Accounting and Economics, Elsevier, vol. 51(1), pages 21-36.
    2. Kedia, Simi & Rajgopal, Shiva, 2011. "Do the SEC's enforcement preferences affect corporate misconduct?," Journal of Accounting and Economics, Elsevier, vol. 51(3), pages 259-278, April.
    3. Bok Baik & David B. Farber & Sam (Sunghan) Lee, 2011. "CEO Ability and Management Earnings Forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1645-1668, December.
    4. Waymire, G, 1985. "Earnings Volatility And Voluntary Management Forecast Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 268-295.
    5. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
    6. Bipin Ajinkya & Sanjeev Bhojraj & Partha Sengupta, 2005. "The Association between Outside Directors, Institutional Investors and the Properties of Management Earnings Forecasts," Journal of Accounting Research, Wiley Blackwell, vol. 43(3), pages 343-376, June.
    7. Gennaro Bernile & Alok Kumar & Johan Sulaeman, 2015. "Home away from Home: Geography of Information and Local Investors," The Review of Financial Studies, Society for Financial Studies, vol. 28(7), pages 2009-2049.
    8. Alexander Dyck & Adair Morse & Luigi Zingales, 2010. "Who Blows the Whistle on Corporate Fraud?," Journal of Finance, American Finance Association, vol. 65(6), pages 2213-2253, December.
    9. Doyle, Jeffrey & Ge, Weili & McVay, Sarah, 2007. "Determinants of weaknesses in internal control over financial reporting," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 193-223, September.
    10. Ball, Ray & Jayaraman, Sudarshan & Shivakumar, Lakshmanan, 2012. "Audited financial reporting and voluntary disclosure as complements: A test of the Confirmation Hypothesis," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 136-166.
    11. Gregory S. Miller, 2006. "The Press as a Watchdog for Accounting Fraud," Journal of Accounting Research, Wiley Blackwell, vol. 44(5), pages 1001-1033, December.
    12. Chyz, James A., 2013. "Personally tax aggressive executives and corporate tax sheltering," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 311-328.
    13. Irene Karamanou & Nikos Vafeas, 2005. "The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 43(3), pages 453-486, June.
    14. Moretti, Enrico, 2004. "Human capital externalities in cities," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 51, pages 2243-2291, Elsevier.
    15. Cheng, Mei & Dhaliwal, Dan & Zhang, Yuan, 2013. "Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 1-18.
    16. Bergstresser, Daniel & Philippon, Thomas, 2006. "CEO incentives and earnings management," Journal of Financial Economics, Elsevier, vol. 80(3), pages 511-529, June.
    17. Jennifer Francis & Dhananjay Nanda & Per Olsson, 2008. "Voluntary Disclosure, Earnings Quality, and Cost of Capital," Journal of Accounting Research, Wiley Blackwell, vol. 46(1), pages 53-99, March.
    18. Feng, Mei & Li, Chan & McVay, Sarah, 2009. "Internal control and management guidance," Journal of Accounting and Economics, Elsevier, vol. 48(2-3), pages 190-209, December.
    19. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
    20. Call, Andrew C. & Kedia, Simi & Rajgopal, Shivaram, 2016. "Rank and file employees and the discovery of misreporting: The role of stock options," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 277-300.
    21. Scott D. Dyreng & William J. Mayew & Christopher D. Williams, 2012. "Religious Social Norms and Corporate Financial Reporting," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 39(7-8), pages 845-875, September.
    22. Dhaliwal, Dan & Erickson, Merle & Heitzman, Shane, 2009. "Taxes and the backdating of stock option exercise dates," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 27-49, March.
    23. Ayers, Benjamin C. & Ramalingegowda, Santhosh & Eric Yeung, P., 2011. "Hometown advantage: The effects of monitoring institution location on financial reporting discretion," Journal of Accounting and Economics, Elsevier, vol. 52(1), pages 41-61, June.
    24. Weili GE & Dawn Matsumoto & Jenny Li Zhang, 2011. "Do CFOs Have Style? An Empirical Investigation of the Effect of Individual CFOs on Accounting Practices," Contemporary Accounting Research, John Wiley & Sons, vol. 28(4), pages 1141-1179, December.
    25. García, Diego & Norli, Øyvind, 2012. "Geographic dispersion and stock returns," Journal of Financial Economics, Elsevier, vol. 106(3), pages 547-565.
    26. Yu, Fang (Frank), 2008. "Analyst coverage and earnings management," Journal of Financial Economics, Elsevier, vol. 88(2), pages 245-271, May.
    27. Merchant, Kenneth A. & Rockness, Joanne, 1994. "The ethics of managing earnings: An empirical investigation," Journal of Accounting and Public Policy, Elsevier, vol. 13(1), pages 79-94.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dan Amiram & Zahn Bozanic & James D. Cox & Quentin Dupont & Jonathan M. Karpoff & Richard Sloan, 2018. "Financial reporting fraud and other forms of misconduct: a multidisciplinary review of the literature," Review of Accounting Studies, Springer, vol. 23(2), pages 732-783, June.
    2. Jian Zhang, 2018. "Public Governance and Corporate Fraud: Evidence from the Recent Anti-corruption Campaign in China," Journal of Business Ethics, Springer, vol. 148(2), pages 375-396, March.
    3. Lamia Chourou & Luo He & Ligang Zhong, 2020. "Does religiosity enhance the quality of management earnings forecasts?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(7-8), pages 910-948, July.
    4. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    5. Andrew C. Call & Gerald S. Martin & Nathan Y. Sharp & Jaron H. Wilde, 2018. "Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 123-171, March.
    6. Hrazdil, Karel & Li, Xin & Suwanyangyuan, Nattavut, 2022. "CEO happiness and forecasting," Global Finance Journal, Elsevier, vol. 52(C).
    7. Dongyoung Lee, 2017. "Corporate Social Responsibility and Management Forecast Accuracy," Journal of Business Ethics, Springer, vol. 140(2), pages 353-367, January.
    8. Ruihao Ke & Meng Li & Yuan Zhang, 2020. "Directors' Informational Role in Corporate Voluntary Disclosure: An Analysis of Directors from Related Industries†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 392-418, March.
    9. Yangyang Chen & C. S. Agnes Cheng & Shuo Li & Jingran Zhao, 2021. "The monitoring role of the media: Evidence from earnings management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 533-563, March.
    10. Francois Brochet & Lucile Faurel & Sarah Mcvay, 2011. "Manager‐Specific Effects on Earnings Guidance: An Analysis of Top Executive Turnovers," Journal of Accounting Research, Wiley Blackwell, vol. 49(5), pages 1123-1162, December.
    11. Shelagh Campbell & Yingqi Li & Junli Yu & Zhou Zhang, 2016. "The Impact of Occupational Community on the Quality of Internal Control," Journal of Business Ethics, Springer, vol. 139(2), pages 271-285, December.
    12. Xing Li & Xia Chen & Baolei Qi & Gaoliang Tian, 2020. "Employee quality and audit fee: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4533-4566, December.
    13. DeFond, Mark & Zhang, Jieying, 2014. "A review of archival auditing research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 275-326.
    14. Sheng-Syan Chen & Robin K. Chou & Yun-Chi Lee, 2020. "The effects of executive compensation and outside monitoring on firms’ pre-repurchase disclosure behavior and post-repurchase performance," Review of Quantitative Finance and Accounting, Springer, vol. 54(1), pages 111-158, January.
    15. Liao, Chih-Hsien & San, Ziyao & Tsang, Albert, 2024. "Corporate governance reforms and voluntary disclosure: International evidence on management earnings forecasts," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    16. Inder K. Khurana & Hoyoun Kyung, 2021. "Internal control material weakness and CEO recruitment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1940-1987, October.
    17. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    18. Call, Andrew C. & Kedia, Simi & Rajgopal, Shivaram, 2016. "Rank and file employees and the discovery of misreporting: The role of stock options," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 277-300.
    19. Chen, Yangyang & Rhee, S. Ghon & Veeraraghavan, Madhu & Zolotoy, Leon, 2015. "Stock liquidity and managerial short-termism," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 44-59.
    20. Zhao, Wenzhuo & Qin, Luohan & Zhao, Yali & Zuo, Jingjing, 2024. "Social media coverage and perk consumption: Agency view or efficiency view?," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1058-1073.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaecon:v:64:y:2017:i:1:p:123-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.