In the paper, Earnings Quality: Evidence from the Field, which was recently made publicly available on SSRN, we provide insights about earnings quality from a new data source: a large survey and a dozen interviews with top financial executives, primarily Chief Financial Officers (CFOs). Why CFOs? While it is clear that there are important consumers of earnings quality such as investment managers and analysts, we focus on the direct producers of earnings quality, who also intimately know and potentially cater to such consumers. In addition, CFOs commonly have a formal background in accounting, which provides them with keen insight into the determinants of earnings quality, including the advantages and limitations of GAAP accounting. CFOs are also key decision-makers in company acquisitions (see Graham, Harvey and Puri 2012), which implies that they have working knowledge of how to evaluate earnings quality from an outside perspective.
Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday, October 8, 2012
Editor's Note: The following post comes to us from Ilia Dichev, Professor of Accounting at Emory University; John Graham, Professor of Finance at Duke University; Campbell Harvey, Professor of Finance at Duke University; and Shiva Rajgopal, Professor of Accounting at Emory University.