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- Title
EARNINGS QUALITY RATINGS AND CORPORATE GOVERNANCE: A COMPARISON OF TWO MODELS.
- Authors
Haber, Jeffry; Braunstein, Andrew
- Abstract
The rating of earnings quality has been a topic of great interest recently, and there are a number of companies that are in the business of preparing such ratings. One such company is 3D Ratings (3D). They use a model that is accounting principles based and looks at the principles in three dimensions: appropriateness, aggressiveness or conservativeness and transparency. Likewise, there are companies that rate corporate governance. One such company is GovernanceMetrics International (GMI). They have a well-defined and tested metric that has been used internationally for a number of years. Corporate governance is rated in a variety of ways. This paper takes the ratings of 50 companies and compares the earnings quality rating against the corporate governance rating. The purpose of the comparison is an exploratory study to see whether earnings quality ratings correlate to governance ratings. The expectation was that companies with good governance (high GMI rating) would correlate with companies that choose appropriate accounting principles (high 3D rating). The analytic tests not indicate that the correlation was statistically significant, though the statistical cut-off for mean difference was 1.60.
- Subjects
WAGES; GOVERNANCEMETRICS International Inc.; CORPORATE governance; CORPORATE ratings; PRIVATE companies; PERSONNEL management; EMPLOYER attitude surveys
- Publication
Journal of Theoretical Accounting Research, 2008, Vol 3, Issue 2, p44
- ISSN
1556-5106
- Publication type
Article