Essays on Accounting Earnings Characteristics

Date of Award

Spring 5-15-2011

Author's School

Graduate School of Arts and Sciences

Author's Department

Business Administration

Additional Affiliations

Olin Business School

Degree Name

Doctor of Philosophy (PhD)

Degree Type



This dissertation is dedicated to identify the effect of (the first paper) and the demand for certain earnings characteristics (the second and third paper). My first paper examines the effect of earnings quality on information flow and equity prices in the Chinese domestic A- and foreign B-share markets. I find that both the ability of A-share returns to predict B-share returns and the B-share discount are negatively correlated with various measures of earnings quality, suggesting that earnings quality can reduce information asymmetry between domestic and foreign investors in the Chinese stock market. Given that information asymmetry between domestic and foreign investors can deter foreign investment, my results suggest providing high quality accounting information can facilitate foreign investment. The second (coauthored with Richard Frankel, Bong Hwan Kim, and Xiumin Martin) and third paper (co-authored with Xiumin Martin) examine how debt holders affect borrowing firms’ earnings characteristics. I find that after the initiation of loan contracts requiring the provision of aging schedules, borrowing firms’ bad debt expense recognition increases significantly. Debt holders also demand more timely recognition of losses than gains when borrowing firms’ CEO compensation induce high preference for risk. Both sets of results are consistent with the notion that debt holders prefer conservative accounting policy. The combined results indicate that accounting information is useful in reducing information asymmetry among equity holders and as well as in mitigating agency costs between equity holders and debt holders.


English (en)

Chair and Committee

Richard Frankel

Committee Members

Jimin Ding, Radhakrishnan Gopalan, Ronald R. King, Xiumin Martin, John Nachbar


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