Title

Innate and discretionary accruals quality and corporate governance

Date of this Version

1-1-2009

Document Type

Journal Article

Publication Details

Citation only.

Kent, P., Routledge, J., & Stewart, J. (2009). Innate and discretionary accruals quality and corporate governance. Accounting and Finance, 50(1), 1-25.

Access the Journal

2009 HERDC submission. FoR code: 1501

© Copyright The Authors; Journal compilation © 2009 AFAANZ

Abstract

This paper extends previous research on the association between corporate governance mechanisms and accruals quality. We derive measures of the discretionary and innate components of accruals quality and regress them against corporate governance characteristics. For discretionary accruals, we find use of a Big 4 audit firm and a larger audit committee as the primary governance mechanisms associated with higher accruals quality. For innate accruals quality, we find that higher quality is associated with an independent board of directors, a larger, more independent and more active audit committee, and use of a Big 4 audit firm. Our findings suggest a stronger relation between sound governance mechanisms and innate accruals quality than discretionary accruals quality.

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This document has been peer reviewed.