Areas of Expertise (10)
John M. McInnis is an educator and researcher in accounting and auditing, who has studied and taught on earnings management and reporting, securities litigation, earnings forecasting, cash flow, financial reporting regulation, reporting fraud, and auditor liability. His research examines the long-run implications, and potential deterrence, of earnings management. He also investigates the relationship between accounting information and firm risk.
McInnis is an associate professor in the department of accounting at the McCombs School of Business, The University of Texas at Austin, where he teaches financial accounting in the Master of Professional Accounting program.
McInnis has published articles in top scholarly journals including The Accounting Review, Journal of Finance, Management Science, and Journal of Accounting & Economics. He received the George H. Newlove Endowed Faculty Fellowship in Accounting in 2014, the Mary L. Collins Doctoral Fellowship in Accounting in 2007, and the Deloitte Foundation Dissertation Fellowship in 2006.
University of Iowa: PhD, Accounting & Finance 2008
University of Texas: BBA and MPA, Business Administration 2002
Media Appearances (4)
Sarbanes-Oxley, Bemoaned as a Burden, Is an Investor’s Ally
New York Times online
Its authors are Matthew S. Ege, an assistant professor of accounting of Texas A&M University, and Dain C. Donelson and John M. McInnis, both of the University of Texas at Austin. They say their work is the first to link weak internal controls on financial reporting with a higher risk of undisclosed accounting fraud at public companies. And proof of this link is an important consideration when weighing the costs and benefits of Sarbanes-Oxley.
Internal control weaknesses correlate with financial fraud
Accounting Today online
The study, by professors Matthew Ege of Texas A&M University and Dain C. Donelson and John M. McInnis of The University of Texas at Austin, found the incidence of fraud disclosures at companies previously found by auditors to have material weaknesses in their internal controls is approximately 80 to 90 percent greater than companies on average, depending on how it was measured.
Current Financial Accounting Research
Knowledge-to-Go Webinar online
Professor John McInnis discusses recent research on:
- Fair value accounting and the financial crisis
- Rules-based vs. principles-based accounting standards
- Governance reforms of Sarbanes-Oxley Act and its effectiveness in reducing the risk of accounting fraud
The Trouble With Superheroes
The Economist print
Cazier and McInnis studied 192 CEOs who had been brought in from outside between 1993 and 2005. They discovered that companies usually recruit CEOs from companies that have done well in the past—no surprise there—and that they usually pay them a fat premium. But then comes the rub: the pay premium is negatively correlated with the future performance of the firm that does the hiring. In other words: the more dazzling the outside recruit, the worse he performs in his new role.
Listing of top scholarly works by John M. McInnis.
We survey commercial bank lenders to better understand how they evaluate and react to variation in financial statement quality and how they view recent changes in accounting standards. A unique aspect of this study is that our respondents focus on medium-size loans to private companies.
Despite debate on the desirability of rules‐based standards, no studies provide evidence on why accounting standards take on rules‐based characteristics. We identify and test five theories from prior research (litigation risk, constraining opportunism, complexity, transaction frequency, and age) that could explain why some U.S. accounting standards contain rules‐based characteristics.
In response to financial reporting scandals, Congress and the securities exchanges mandated increases in board and audit committee independence and banned most non-audit services. We exploit these exogenous shocks to examine whether these governance reforms reduced financial reporting fraud.
We examine the ability of reported loan fair values to predict credit losses relative to the ability of net historical costs currently recognized under U.S. GAAP.
In this study, we provide direct evidence linking earnings management to earnings discontinuities for a sample of firms that settle securities class action lawsuits and restate earnings from the alleged GAAP violation period.
We correlate analysts' forecast errors with temporal variation in investor sentiment. We find that when sentiment is high, analysts' forecasts of one-year-ahead earnings and long-term earnings growth are relatively more optimistic for “uncertain” or “difficult-to-value” firms.
Some claim that rules-based accounting standards shield firms from litigation, while others argue that violations of detailed rules give plaintiffs a “roadmap” to successful litigation. We inform this debate by investigating whether rules-based standards are associated with the incidence and outcome of securities class action litigation.
This study investigates whether the timely revelation of bad earnings news is associated with a lower incidence of litigation.