Three Essays on Corporate Governance and Meeting-Beating or Missing Analyst Forecasts

Authors

Maria F. Rickling, Florida International UniversityFollow

Document Type

Dissertation

Major/Program

Business Administration

First Advisor's Name

Kannan Raghunandan

First Advisor's Committee Title

Committee Co-Chair

Second Advisor's Name

Dasaratha Rama

Second Advisor's Committee Title

Committee Co-Chair

Third Advisor's Name

Abhijit Barua

Fourth Advisor's Name

Suchismita Mishra

Keywords

corporate governance, analyst forecast, earnings forecast, audit fees, director compensation, audit committee, tenure, multiple board membership

Date of Defense

7-11-2011

Abstract

The beginning of the 21^st century was plagued with unprecedented instances of corporate fraud. In an attempt to address apparent non-existent or “broken” corporate governance policies, sweeping measures of financial reporting reform ensued, having specific requirements relating to the composition of audit committees, the interaction between audit committees and external auditors, and procedures concerning auditors’ assessment of client risk. The purpose of my dissertation is to advance knowledge about “good” corporate governance by examining the association between meeting-or-beating analyst forecasts and audit fees, audit committee compensation, and audit committee tenure and “busyness”. Using regression analysis, I found the following: 1) the frequency of meeting-or-just beating (just missing) analyst forecasts is negatively (positively) associated with audit fees, 2) the extent by which a firm exceeds analysts’ forecasts is positively (negatively) associated with audit committee compensation that is predominately equity-based (cash-based), and 3) the likelihood of repeatedly meeting-or-just beating analyst forecasts is positively associated with audit committee tenure and “busyness”. These results suggest that auditors consider clients who frequently meet-or-just beat forecasts as being less “risky”, and clients that frequently just miss as being more “risky”. The results also imply that cash-based director compensation is more successful in preserving the effectiveness of the audit committee’s financial reporting oversight role, that equity-based compensation motivates independent audit committee directors to focus on short-term performance thereby aligning their interests with management, and that audit committee director tenure and the degree of director “busyness” can affect an audit committee member’s effectiveness in providing financial reporting oversight. Collectively, my dissertation provides additional insights regarding corporate governance practices and informs policy-makers for future relevant decisions.

Identifier

FI11072803

Recommended Citation

Rickling, Maria F., "Three Essays on Corporate Governance and Meeting-Beating or Missing Analyst Forecasts" (2011). FIU Electronic Theses and Dissertations. 438.
https://digitalcommons.fiu.edu/etd/438