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We thank Markus Arnold, Mary E. Barth (senior editor and discussant) , Ulf Brudggemann, Christina Dargenidou (discussant) , Matt Hall, Kevin Jackson, Peter Joos, Guy Jubb, Laurence van Lent (editor) , Victor Maas, Stephen Taylor (discussant) , Geoffrey Whittington, Stephen Zeff, and participants at the 2016 British Accounting and Finance Association Annual Conference, 2015 European Accounting Association-ICAS Symposium, 2016 European Accounting Association Annual Congress, 2015 IASB-ICAS Meeting on the Future of Financial Reporting, 2015 European University Foundation Conference, 2017 XII Workshop on Empirical Research in Financial Accounting, University of Amsterdam, University of Bath, University of Bologna, BI Norwegian Business School, Cardiff University, Columbia University Business School, ESSEC Business School, University of Essex, Ghent University, University of Glasgow, Heriot-Watt University, Humboldt University of Berlin, 2017 ICJCE/AT1 Madrid Meeting, 2016 International Forum of Accounting Standard Setters Meeting in Toronto, Keele University School of Management, King's College London, Lancaster University, LUISS Business School, Magdeburg University, The University of Manchester, Mannheim University, Open University, Portsmouth University, Universidade de Sao Paulo, University of St.Gallen, Stockholm School of Economics, Strathclyde University, Tilburg University, National Taiwan University, and University of Technology Sydney for helpful comments and discussions. We are grateful to Michelle Crickett, Francoise Flores, Saskia Slomp, Rasmus Sommer, and Allister Wilson, who provided invaluable assistance for this project. We acknowledge the financial support of the Scottish Accountancy Trust for Education and Research, the Institute of Chartered Accountants of Scotland (ICAS) , and the European Financial Reporting Advisory Group (EFRAG) . Beatriz Garca Osma acknowledges financial assistance from the Spanish Ministry of Science (ECO2016-77579 and PID2019-111143GB-C33) . Joachim Gassen acknowledges financial support from Deutsche Forschungsgemeinschaft-Project-ID 403041268-TRR 266. Ethical approval for this project was granted at the University of Bristol. Finally, we acknowledge the contribution of Thomas Jeanjean to the earlier phases of our study. Any remaining errors are our own.

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The Usefulness of Financial Accounting Information: Evidence from the Field

Publicated to:ACCOUNTING REVIEW. 96 (6): 73-102 - 2021-11-01 96(6), DOI: 10.2308/TAR-2019-1030

Authors: Cascino, Stefano; Clatworthy, Mark A.; Garcia Osma, Beatriz; Gassen, Joachim; Imam, Shahed;

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Abstract

We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers' earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers' earnings management incentives negatively affect investment professionals' assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals' assessments of accounting information usefulness, irrespective of preparers' corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals.

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