The effect of Financial Reports’ Quality on Firm’s Performance

Pereira, Cláudia; Cerqueira, António Melo; Brandão, Elísio

http://hdl.handle.net/10400.22/584

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Authors

Pereira, Cláudia

Cerqueira, António Melo

Brandão, Elísio

Abstract(s)

We analyse whether the quality of firms’ Financial Reports (FRQ) produces any effect on their performance. Bradshaw et al. (2004) and Gelos and Wei (2005) call attention to the fact that the international capital movements is affected by FRQ. Following Schipper and Vicent (2003) we use the abnormal accruals to access earnings quality. For seventeen European countries, we found evidence that FRQ produces a positive impact on firm’s performance. This finding indicates that mangers are not opportunists and tends to make decisions to defend the firm’s best interests. This result is robust since it does not depend on the accounting firms’ performance proxy (ROA/ROE). In addition, it is also consistent when we use data in time series and in cross-sectional and when we estimate regression with lagged or the current year information about abnormal accruals.