Download or read book The Effect of Internal Governance on Earnings Quality written by Trung Pham and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the impact of internal governance on firms' earnings quality. Analytically developed by Acharya et al. (2011), internal governance is the checks-and-balances imposed by subordinates on the CEO, forcing the CEO to focus on the firm's long-term value. While there is a burgeoning literature on the impact of internal governance on various dimensions of firm performance such as investment and innovation efficiency, there is a lack of understanding about how internal governance affects the quality of reported accounting numbers. Given the importance of earnings quality for decisions such as investment, I investigate whether the above-mentioned bottom-up governance mechanism has any influence upon the quality of earnings. Specifically, I focus on the impact of internal governance on firms' earnings persistence, earning smoothness, accruals quality, internal control weaknesses, and financial restatements. Based on samples for the 2004-2018 period, I document that firms with effective internal governance have higher quality earnings. This finding is robust to firm- and year-fixed effects, an alternative measure of internal governance effectiveness, and additional control variables related to corporate governance. Additionally, I find some evidence that the impact of internal governance on earnings quality is weaker for firms with powerful or overconfident CEOs.This dissertation contributes to the literature on internal governance as well as the literature on earnings quality by documenting the effect of internal governance on earnings quality. The findings of this dissertation also have practical implications for various parties such as investors, financial analysts, auditors, management, and boards of directors.