GILLES HILARY

By : Ridwan Islam Amanda Lafave

Fion LiGreg Milosek

Micky Petit FrereMagie Soliman

Background

• French Accounting Academic

• MBA, PhD and DESCF

• Professor

• Auditor for KPMG and E&Y

How Does Financial Reporting Quality Relate to Investment Efficiency?

Findings Higher financial reporting quality (FRQ)

improves investment efficiency by reducing information asymmetries

High FRQ facilitates investment for constrained firms and curbs investment for firms likely to over-invest

Firms with higher FRQ are less likely to deviate from their predicted level of investment

How Does Financial Reporting Quality Relate to Investment Efficiency? (Cont.)

Research Design Estimates whether FRQ is negatively

(positively) associated with investment when firms are more likely to over-invest (under-invest)

FRQ Index (AQ, AQWi, and FOG Index) Sample size = 34,791 firm-year

observations from 1993 to 2001 Examines capital expenditures,

acquisitions, and asset sales

How Does Financial Reporting Quality Relate to Investment Efficiency? (Cont.)

Relevance Dechow and Skinner (2000) Earnings

Management article Information asymmetries give rise to

adverse selection and moral hazard Opportunistic earnings management

extracted from accruals quality Dechow cited three times in papers

related to earnings, cash flows, and quality of accruals

The Effect of Auditor Quality on Financing Decisions

Findings

The Effect of Auditor Quality on Financing Decisions (Cont.)

Research Design

Relevance

Accounting Quality and Firm-Level Capital Investment

Findings

Accounting Quality and Firm-Level Capital Investment (Cont.)

Research Design

Relevance

The Credibility of Self-Regulation: Evidence from the Accounting Profession's Peer Review

Program

Findings

The Credibility of Self-Regulation: Evidence from the Accounting Profession's Peer Review

Program (Cont.)

Research Design

Relevance

Recurring Theme

As accounting quality, auditor quality, financial reporting quality increases, information asymmetry, earnings management, adverse selection, and moral hazard decreases.

“If managers could commit to revealing their private information, investors would not fear buying securities at an inflated price."

Other Articles

Does Religion Matter in Corporate Decision Making in America?

Organized Labor and Information Asymmetry in the Financial Markets

Does Past Success Lead Analysts to Become Overconfident?

Analyst Coverage and Financing Decisions

Questions?