Management skills and the quality of accounting information in Brazil

This study aims to analyze managerial skills in the practice of earnings management via earnings smoothing and accruals in B3 companies. To this end, a quantitative and descriptive study was conducted using data from the Economática database, with a sample of 966 observations from 2010 to 2020. Demerjian et al.’s (2012) model was used to measure managerial skill. Its efficiency parameters are the manager’s characteristics in using resources to generate revenue. The models by Leuz et al. (2003) and McNichols (2002) were used to measure smoothing and levels of earnings management. The results showed that, on average, more skillful managers tend to smooth and manage earnings at higher levels than less skilled managers, indicating that in Brazil, on average, more skillful managers reduce the quality of Brazilian firms’ earnings. This paper contributes to the literature and fills a gap regarding managerial skills and the impact on the results of Brazilian companies. It shows that, in Brazil, managerial skill is associated with smoothing and earnings management practices and sheds light on interested parties regarding the influence of the profile of managers and their ability to influence the numbers released in the Brazilian market.