Audit Committee Expertise and Financial Analysts' and Investors' Ability to Anticipate Future Earnings

One of the important attributes of high quality accounting information is its ability to aid financial statement users in forming expectations about the firm's future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher reporting quality. We extend the literature by examining the association between attributes of analysts' forecasts and audit committee expertise. We find that analyst earnings forecasts of firms with an audit committee member with accounting financial expertise are more accurate and less dispersed. These associations tend to be stronger in weaker governance firms. We also find that audit committee expertise is associated with a more informative stock price for firms weaker governance. We do not find a significant association between non-accounting financial expertise and attributes of analysts' forecasts or earnings informativeness. Overall, the findings contribute to our understanding of the role of accounting expertise in audit committees.