Earnings Quality and the Agency Costs of Managerial Discretion: The Corporate Governance Effect of Accounting Information

Based on the data of listed companies between 2002 and 2004, this paper analyses how the earnings quality, measured by accrual quality, affects the list companies´ agency costs of managerial discretion. It reveals: earnings quality affects the list companies´ agency costs of managerial discretion significantly, the agency costs decreases with the improvement of earnings quality. The results are robust while controlling the effect of endogeneity, omitted variable and cluster effect.