Dr. Carol Liu
Does Audit Committee Oversight Make Management Guidance More Useful for Analysts?
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This study investigates whether audit committee effectiveness affects the association between management earnings forecasts and analysts’ forecasts. Using an instrumental variable approach, we demonstrate that not only does the audit committee relate to management’s decision of making an earnings forecast, as in Karamanou and Vafeas (2005), it also improves the quality of management forecasts, which results in lower analysts’ forecast error and dispersion. We reveal that among the audit committee attributes, independence is the most important in improving management forecast quality. The influence of the committee’s size, meeting frequency, and financial expertise on the relations between management earnings forecasts and the properties of analysts’ forecasts are stronger when the audit committee is completely independent of the management. This study provides evidence on the association of the audit committee oversight with the quality of voluntary disclosure of a firm.
Carol Liu specializes in financial accounting. Her primary research interests are in corporate governance, capital markets, and corporate disclosure. Her current research focuses on how the oversight of corporate boards influences earnings quality, corporate disclosure policy, and analyst behavior. Her teaching interests include financial and managerial accounting. She is a Certified Public Accountant.
Most Recent Publication:
Carol Liu, Sandeep Nabar. (2006). The stock market reaction to Ernst & Young's sale of its consulting unit to Cap Gemini. Managerial Auditing Journal, 21(9), 948-956.
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