Date of Award

Spring 5-15-2022

Degree Type


Degree Name

Doctor of Philosophy (PhD)




Harris, David


Disclosure, Financial reporting, Internal control, Restatement

Subject Categories

Accounting | Business | Finance and Financial Management


This dissertation research includes three Chapters. Chapter One proposes a new and simple measure of financial reporting quality. Chapter Two and Chapter Three apply this new measure to examine the association between financial reporting quality and firms' internal governance issues, such as internal control quality and a possible outcome of internal control weakness (ICW), financial restatements.In Chapter One of the thesis, I propose a parsimonious, theory-based and empirically-supported measure of missing variables, REPORT. Chen et al. (2015) proposes a measure of disclosure quality, DQ, based on missing financial statement variables. DQ includes hundreds of items and is complex to program. I propose a parsimonious, theory-based and empirically-supported measure of missing variables, REPORT, based on the seven variables found most value relevant by Lev and Thiagarajan (1993). To compare REPORT with DQ, I replicate Chen, et al (2015) and find results as originally reported. REPORT also is similarly associated with the measures used to validate DQ, forecast accuracy, analyst forecast dispersion, bid-ask spread, and cost of capital. With Vuong and Clarke tests I compare REPORT and DQ with these disclosure quality metrics and find that REPORT performs as well as, or better than, DQ in these tests. The comparative power of REPORT over DQ indicates that omission of the elements of a small set of highly value-relevant financial variables better indicates a firm's disclosure quality than omissions of a larger set of variables that also includes less value-relevant, or irrelevant, financial variables. REPORT, being theory-based, omits examination of many items likely unnecessary to firm valuation and is easily implemented, not only by trained researchers, but even by average investors, which opens many potential applications in both academic and practical areas. Chapter Two examines the association between internal control weakness (ICW) and the two "missing data"-based measures, DQ and REPORT. Being able to identify traits of firms of ICWs before their public issuances would provide investors with more information to plan for their investment decisions. As an important aspect of internal control, financial statement preparation quality may reflect firms' internal control system. Poor internal control system may cause omissions of numbers reported on firms' financial statements. I examine whether reporting or omitting of financial statement variables can reflect firms' internal control quality; I also examine if omitting financial statement variable is informative in predicting issuance of an ICW in the next period. However, the results lack adequate statistical significance in drawing conclusions in terms of associations between ICWs and DQ/REPORT. Chapter Three examines the association between misstatements and DQ/REPORT. Internal control weakness and restatements do not always coincide. Internal control weaknesses, alone, cannot fully reflect firms' risks of restatements. In this study, I examine whether DQ and REPORT provides with additional information, other than ICWs, in explaining likelihood of misstatements. I expect that firms with higher DQ and REPORT are less likely to restate their financial statements in subsequent periods. The results lack adequate evidence to draw conclusions on associations between restatements and DQ/REPORT, but the results have added further evidence to the literature on associations between ICWs and likelihood of misstatements.


Open Access