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Contemporary Accounting Research Vol. 43 No. 2 2026

Knowledge Is Power: The Importance of Public Accounting Experience for Mutual Fund Managers' Monitoring

Yangyang Chen1; Jun Huang2; Ting Li2; Jeffrey Pittman3,4

1 Department of Accountancy City University of Hong Kong Hong Kong China · 2 Institute of Accounting and Finance Shanghai University of Finance and Economics Shanghai China · 3 Faculty of Business Administration Memorial University St. John's Canada · 4 Pamplin College, Virginia Tech Blacksburg Virginia USA

open access

Abstract

We document that firms held by mutual fund managers who have public accounting experience earlier in their careers exhibit higher‐quality financial reporting, as evidenced by a lower likelihood of financial statement restatements. Additional evidence shows that fund managers with public accounting experience are more likely to conduct site visits to their portfolio firms and discuss accounting policy–related topics during those visits. Moreover, the restatement likelihood falls after fund managers' site visits, particularly when they raise accounting policy–related issues during their visits. In cross‐sectional results consistent with expectations, we find that the role that fund manager public accounting experience plays is amplified when the firm suffers more severe agency problems, firm information asymmetry is worse, fund managers are more risk averse, fund managers have prior work experience at larger accounting firms, fund managers hold a larger proportion of the firm's shares, or there is coordination among mutual funds. Collectively, our evidence suggests that fund managers with public accounting experience impose stricter external monitoring on their portfolio firms' financial reporting choices.

DOI
10.1111/1911-3846.70032
Volume
43
Issue
2
Pages
745-778
Language
en
Sources
openalex crossref

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