The Impact of Reputation on the Informativeness of Earnings and Accounting Choices

Abstract

The article hypothesizes that the level of reputation affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis exploits the following: the positive relationship between reputation and firms' risk‐return profiles, and managers' incentives in using discretionary accounting accrual adjustments. Results show that reputation is positively associated with earnings' explanatory power for returns, and related to the magnitude of accounting accrual adjustments.

Citation

AlNajjar, F.K. and Riahi‐Belkaoui, A. (2002), "The Impact of Reputation on the Informativeness of Earnings and Accounting Choices", Review of Accounting and Finance, Vol. 1 No. 1, pp. 88-101. https://doi.org/10.1108/eb026981