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In this study, we examine the relation between managerial ability and the quality of a firm's information environment. An emerging stream of research has identified managerial ability as an important determinant of accruals quality and management forecast quality. However, our understanding of the impact of managerial ability on a firm's broader information environment is incomplete because it captures more than these specific financial reporting disclosures. Using a composite index based on various proxies for a firm's information environment, we find a positive relation between managerial ability and a firm's information environment. Consistent with our argument that managers' equity incentives improve disclosure quality, we find that the quality of a firm's information environment improves when managers have higher levels of equity incentives. We contribute to the literature by providing more complete and conclusive evidence about the impact of managerial ability on a firm's broader information environment. [ABSTRACT FROM AUTHOR]

We study the relation between audit committee accounting expertise, analyst following, and market liquidity. Our main results indicate that analyst following increases subsequent to the appointment of an accounting expert to the audit committee. We also provide evidence that accrual quality, as opposed to audit quality or management earnings forecasts, is the channel through which accounting expertise increases analyst following and improves analyst forecast properties. We also show that audit committee accounting expertise is related to higher trading volume and lower liquidity risk, supporting incentives for greater analyst following. Our study extends prior literature by providing evidence that audit committee accounting expertise enhances firms’ information environment beyond the effects it has on financial reporting quality or analysts’ forecast properties. Our study also complements the literature on determinants of analyst following and market liquidity, both of which are related to cost of capital. Results from our study should be useful to firms seeking to enhance analyst following and market liquidity. [ABSTRACT FROM AUTHOR]

The article presents a study of the relation between operational efficiency and firm performance. The author states that it is important to understand whether measures of operational efficiency derived from frontier analysis improve profitability forecasts and whether capital market participants impound the predictive information in the efficiency measures because future profitability is linked to firm valuation. Findings indicate that efficiency changes on Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) are associated with changes in current and future profitability.

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This article discusses the responses of the American Accounting Association Financial Accounting and Reporting Section to Preliminary Views on Financial Instruments with the Characteristics of Equity released by the U.S. Federal Accounting Standards Board (FASB). This FASB document attempts to clarify the distinction between debt and equity in light of the development of financial instruments repayable in either stock or cash. Legal and accounting definitions of debt and equity are compared.