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The usefulness of financial accounting information: evidence from the field

Cascino, Stefano ORCID: 0000-0002-6703-741X, Clatworthy, Mark A., Osma, Beatriz Garcia, Gassen, Joachim and Imam, Shahed (2021) The usefulness of financial accounting information: evidence from the field. Accounting Review, 96 (6). 73 - 102. ISSN 0001-4826

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Identification Number: 10.2308/TAR-2019-1030

Abstract

We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers’ earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers’ earnings management incentives negatively affect investment professionals’ assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals’ assessments of accounting information usefulness, irrespective of preparers’ corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals.

Item Type: Article
Official URL: https://aaapubs.org/loi/accr
Additional Information: © 2021 American Accounting Association
Divisions: Accounting
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Date Deposited: 04 Dec 2020 10:48
Last Modified: 07 Dec 2021 16:42
URI: http://eprints.lse.ac.uk/id/eprint/107569

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