Evidence on the relation between managerial ability and financial reporting timeliness

Abstract

While prior research has investigated the relation between firm‐level attributes and financial reporting timeliness, there is little evidence on whether managerial ability is associated with financial reporting timeliness. We examine the relation between managerial ability and financial reporting timeliness. Managers with higher ability possess greater human capital and are better able to maintain the systems and controls underlying the company's financial information. We therefore predict that managers with higher ability produce more timely financial disclosures. We find that, incremental to firm‐level attributes, higher managerial ability is associated with a shorter earnings announcement lag, a shorter audit report lag, and a lower probability of a late US Securities and Exchange Commission filing. Collectively, our results suggest that managerial ability has a positive influence on the timeliness of financial reporting.