The purpose of this study is to examine how the accounting expertise of audit committee members is associated with the disclosure of forward-looking information.
Manual content analysis is used to analyze forward-looking information disclosed in annual reports as well as gather data about the accounting expertise of directors. Regression analysis is performed to study the association between the disclosure variables and the accounting expertise of audit committee members.
The results show that the accounting expertise of audit committee members is associated with forward-looking disclosure practices, particularly with information of a financial and strategic nature.
The evidence has direct implications for companies in the selection of directors, as stakeholders may demand nomination committees to appoint audit committees with the accounting experts. They may also request regulatory actions regarding the structure of the audit committee, as these add to the evidence on the benefits of selecting such experts.
The evidence on the role of accounting expertise could also help the US Securities and Exchange Commission (SEC) to narrow the definition of financial expertise to specifically consider accounting expertise, as is already happening in the EU context.
This paper extends prior research on corporate governance and voluntary disclosure by showing the association between the company having at least one accounting expert in the audit committee and the level of disclosure of value-relevant information.
