Essays on the determinants and effects of financial reporting quality

This dissertation provides new evidence on the determinants and market effects of financial reporting quality. I first investigate whether the deteriorating mapping of accruals into cash flows over the last 40 years implies an over-time change in accrual reliability. Specifically, I examine whether this temporal change is associated with changes in accruals reliability and/or recognition lead/lag in accounting. The evidence shows that the declining accruals mapping is partly explained by less reliable accruals due to business uncertainty and managerial opportunism and partly by the lag in recognition of gains due to conservatism. Furthermore, investors negatively price the accruals mapping affected by reliability. However, the recognition-related accruals mapping does not have significant pricing effects. This investigation is important because identifying the determinants of the time-series change in accruals quality can inform policymakers and other parties in evaluating various measures to improve accounting quality.; I also explore whether financial reporting quality measured at the industry level can determine the information content represented in stock return synchronicity by inducing excess stock comovement. First, I find that stock return synchronicity is negatively associated with industry reporting quality. Then I find that an industry momentum strategy generates more profits in the 'poor' sample than in the 'good' sample, which implies the prevalence of excess stock comovement in the 'poor' sample, which is driven by overweighting of past returns. Overall, the evidence supports the hypothesis that industry reporting quality is related to the common information impounded into stock prices. This study contributes to the literature by suggesting that: improving the quality of financial reporting might reduce the overweight on prior beliefs relative to new information at the industry level and thus speed the impounding of common information into stock prices.