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Gilles Hilary

Gilles Hilary. By : Ridwan Islam Amanda Lafave Fion Li Greg Milosek Micky Petit Frere Magie 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

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Gilles Hilary

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  1. Gilles Hilary By : Ridwan Islam Amanda Lafave Fion Li Greg Milosek Micky Petit Frere MagieSoliman

  2. Background • French Accounting Academic • MBA, PhD and DESCF • Professor • Auditor for KPMG and E&Y

  3. 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

  4. 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

  5. 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

  6. The Effect of Auditor Quality on Financing Decisions • Findings

  7. The Effect of Auditor Quality on Financing Decisions (Cont.) • Research Design • Relevance

  8. Accounting Quality and Firm-Level Capital Investment • Findings

  9. Accounting Quality and Firm-Level Capital Investment (Cont.) • Research Design • Relevance

  10. The Credibility of Self-Regulation: Evidence from the Accounting Profession's Peer Review Program • Findings

  11. The Credibility of Self-Regulation: Evidence from the Accounting Profession's Peer Review Program (Cont.) • Research Design • Relevance

  12. 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."

  13. 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

  14. Questions?

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