SYNOPSIS:
This study examines the association between chief executive officer (CEO) age and the financial reporting quality of firms. The financial reporting qualities examined are the meeting or beating of analyst earnings forecasts and financial restatements. Based on extant research, we hypothesize that older CEOs are associated with higher-quality financial reporting. Using a sample of 3,413 firms for the period 2005 to 2008, we find a positive association between CEO age and financial reporting quality. Specifically, we find that CEO age is negatively associated with firms meeting or beating analyst earnings forecasts and financial restatements. Our study therefore extends the corporate governance and financial reporting quality literature by identifying CEO age as a determinant of financial reporting quality.
Data Availability: Data are publicly available.
Purpose
– The purpose of this study is to investigate the association between a corporate executive’s gender and audit fees. Based on the findings of extant research that there are gender-based differences that may have implications for the financial reporting process, the authors posit an association between CEO gender and audit fees.
Design/methodology/approach
– The authors test their hypothesis by performing both univariate and multivariate regression analyses on a sample of 8,402 Compustat firm-year observations from US firms for 2003-2010.
Findings
– The authors' findings indicate that firms with female CEOs are associated with higher audit fees. Their results hold after controlling for self-selection bias and factors shown by prior studies to be associated with audit fees.
Research limitations/implications
– Although the authors control for factors that would increase audit fees, their study is limited by the degree to which higher audit fees reflect higher quality audits. Also, because their sample is from large publicly traded nonfinancial firms, their results may not be applicable to other types of firms. The authors study has implications for policy setting because their findings provide some evidence of a significant association between a CEO characteristic (gender) and financial reporting quality. Their findings, thus, provide some support for the Securities and Exchange Commission requirement that CEOs should certify their firm’s financial statements.
Originality/value
– The authors study contributes to the audit fees and corporate governance literature by providing empirical evidence of an association between audit fees and CEO gender. To their knowledge, no study, to date, has investigated this association.
Corporate scandals brought the issue of corporate governance to the forefront of the agendas of lawmakers and regulators in the early 2000s. As a result, Congress, the New York Stock Exchange, and the NAS-DAQ enacted standards to improve the quality of corporate governance, thereby enhancing the quantity and quality of disclosures by listed companies. We investigate the relationship between corporate governance strength and the quality of disclosures in pre-and post-regulation time periods. If cross-sectional differences in corporate governance policies affect the quality of financial disclosures, the quality of information available to analysts varies with such policies. Specifically, higher quality disclosures, produced as a result of strong corporate governance, should lead to more accurate and less dispersed analysts' forecasts. Our analysis suggests that voluntary implementation of stronger corporate governance enhanced the quality of disclosures in the pre-regulation period; however, exceeding current corporate governance standards does not appear to result in higher quality disclosures post-regulation. These results suggest that SOX and the stronger regulations enacted by U.S. exchanges were effective in reducing variation in the quality of financial information available to investors.
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