Corporate Human Capital for Financial Reporting, Earnings Quality, and Audit Fees: Evidence from China.

• In Event: International Issues

Abstract

The financial reporting process involves estimations and judgement. As such, the quality of corporate human capital for financial reporting could significantly affect financial reporting quality and audit risk. Following the labour economics literature, this study uses the percentage of accounting personnel with bachelor’s degrees to measure the quality of human capital for financial reporting and finds that companies with well-educated accounting personnel report significantly lower discretionary accruals and are less likely to restate earnings. Moreover, such companies pay lower audit fees to external auditors. These findings are robust to fixed effects models and a propensity score matching approach. This study also shows that the education level of a company’s accounting personnel is positively correlated with their average salary and earnings informativeness, consistent with the hypothesis that well-educated accounting personnel are more productive and help improve financial reporting quality.

Authors

• Ferdinand A. Gul, Deakin Univerisity

• Bin Lin, Sun Yat-sen University

• Zhifeng Yang, Stony Brook University

• Haoran Zhu, Sun Yat-sen University