Field: Accounting. Required: According To The Essay, Fill In ✓ Solved

Field: Accounting. Required: According to the essay, fill in

Field: Accounting. Required: According to the essay, fill in the information highlighted in red in the proposal (mostly summaries). Length: one page, maximum 300 words. For the literature review, provide a brief summary of each of the three assigned readings. You may also incorporate additional research from the essay above.

Paper For Above Instructions

Executive summary

This document fills the proposal sections highlighted in red by providing concise literature-review summaries of three assigned readings and integrating relevant additional research from the referenced essay. The goal is a clear, one-page (≈300-word) set of summaries suitable for inclusion in the group proposal. The summaries focus on core findings, methodological approach, and relevance to an accounting research proposal on financial reporting quality and disclosure decisions.

Reading 1: Financial reporting quality and information asymmetry

Summary: Reading 1 examines how financial reporting quality reduces information asymmetry between managers and external users, improving capital allocation efficiency. Using archival analysis of firm-level accounting metrics and market responses, the study finds that higher-quality disclosures correlate with lower bid-ask spreads and more accurate analyst forecasts (Healy & Palepu, 2001; Ball & Shivakumar, 2005). Methodologically, the authors employ regression models controlling for firm size, leverage, and industry. The practical implication for the proposal is that improved disclosure quality can be operationalized using measures such as accruals quality, analyst forecast errors, and market liquidity (Penman, 2013).

Reading 2: Incentives, governance, and earnings management

Summary: Reading 2 addresses managerial incentives and governance structures that lead to earnings management (Watts & Zimmerman, 1986; Jones, 1991). The paper applies the discretionary accruals model to detect opportunistic behavior and links governance variables—board independence, audit quality, and ownership concentration—to reduced earnings manipulation. The core finding is that stronger governance and higher-quality audits are associated with lower discretionary accruals, supporting the positive-accounting theory perspective that economic incentives shape accounting choices. For the proposal, use discretionary accruals as a dependent variable and governance characteristics as explanatory variables (Kieso et al., 2019).

Reading 3: Standards, comparability, and standard-setting effects

Summary: Reading 3 evaluates how adoption of stricter accounting standards and clearer conceptual frameworks improves comparability and investor decision-making (IASB, 2018; Schipper, 2005). Using cross-country comparisons and event studies around standard-adoption dates, the research documents increased comparability metrics and reduced cost of capital following standard harmonization. The study highlights both intended benefits and transitional costs. For the group proposal, this reading justifies studying a standards-change event or cross-jurisdiction comparison to measure changes in reporting quality and market outcomes (Deegan, 2014).

Additional research synthesis (from the essay)

Summary: The additional essay-based research synthesizes recent empirical and theoretical advances linking disclosure transparency to firm valuation and stakeholder trust (Healy & Palepu, 2001; Penman, 2013). It emphasizes multi-method approaches—archival data complemented by interviews or survey evidence—to capture both measurable outcomes (e.g., analyst forecast accuracy) and manager motivations. The essay recommends triangulating accrual-based measures with market-based indicators and qualitative evidence to strengthen causal interpretation (Libby, Bloomfield, & Nelson, 2002). This supports a mixed-methods design for the proposal.

Proposed fill-in content for the proposal (300-word target)

Proposed literature-review text (300 words max): Financial reporting quality is central to efficient capital markets because it reduces information asymmetry and informs investor decisions. Prior studies demonstrate that higher disclosure quality is associated with improved market liquidity and more accurate analyst forecasts (Healy & Palepu, 2001; Ball & Shivakumar, 2005). Incentives and governance structure critically shape reporting outcomes: stronger boards, higher audit quality, and concentrated ownership tend to constrain earnings management as measured by discretionary accruals (Watts & Zimmerman, 1986; Jones, 1991; Kieso et al., 2019). Additionally, tighter accounting standards and conceptual frameworks improve comparability and lower the cost of capital after adoption (IASB, 2018; Schipper, 2005). Recent literature recommends combining archival measures (accruals quality, analyst errors, liquidity) with qualitative evidence to better capture managerial motives and regulatory impacts (Penman, 2013; Libby et al., 2002). Building on these findings, this proposal will (1) measure reporting quality using discretionary accruals and market-based indicators, (2) test governance and standard-setting influences using panel regression and event-study techniques, and (3) incorporate supplementary survey or interview data to contextualize quantitative results. This mixed-methods approach improves internal validity and provides actionable insight for regulators and practitioners seeking to enhance transparency and investor confidence (Deegan, 2014; Healy & Palepu, 2001).

Conclusion

The filled-in proposal text synthesized three core readings and supplemental essay research into a coherent literature summary and proposed empirical approach. The recommended measures and methods align with recent accounting research and support feasible execution within the project timeline.

References

  1. Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: Comparative evidence. Journal of Accounting and Economics, 39(1), 83–110.
  2. Deegan, C. (2014). Financial Accounting Theory (4th ed.). McGraw-Hill Education.
  3. Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1–3), 405–440.
  4. IASB. (2018). Conceptual Framework for Financial Reporting. IFRS Foundation.
  5. Jones, J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228.
  6. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th ed.). Wiley.
  7. Libby, R., Bloomfield, R., & Nelson, M. W. (2002). Experimental research in financial accounting. Accounting, Organizations and Society, 27(8), 775–810.
  8. Penman, S. H. (2013). Financial Statement Analysis and Security Valuation (5th ed.). McGraw-Hill Education.
  9. Schipper, K. (2005). The introduction of international accounting standards in Europe: Implications for international convergence. European Accounting Review, 14(1), 101–126.
  10. Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Prentice-Hall.

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