The Effect of Managerial Adverse Experience on Financial Reporting

Thomas Kubick*, Yijun Li

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We identify executives who have experienced significant accounting-related adverse events during their careers as a powerful setting to examine the extent to which prior professional experience can influence subsequent financial reporting policies. We find that firms led by senior financial executives who have experienced accounting-related adverse events during their careers exhibit greater unconditional accounting conservatism, a lower likelihood of experiencing future accounting-related adverse events, and less positive abnormal discretionary accruals. This effect tends to be stronger when the experience is more frequent, recent, severe, or proximate. Overall, our results reveal a meaningful relationship between managers’ professional experience and accounting policies.
Original languageEnglish
JournalThe Accounting Review
Early online date11 Aug 2022
DOIs
Publication statusPublished - 11 Aug 2022

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