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Firm- and Country-Level Attributes as Determinants of Earnings Management: An Analysis for Latin American Firms

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  • Paolo Saona
  • Laura Muro

Abstract

This article analyzes firm- and country-level determinants of the earnings management for a sample of Latin American companies from 1997 to 2015 by using panel data to deal with the endogeneity and heterogeneity problems. Results show that dividend pay-outs impact positively on earnings management. The ownership structure, however, is a double-edged sword as a controlling mechanism that may constrain earnings manipulation but may also exacerbate it. Concerning country-level variables, we found that the development of the financial system behaved opposite of expectation. Consequently, before inefficient financial markets in Latin America, managers had more room for manipulation of financial statements. The legal and regulatory system, however, proved itself to be efficient in reducing the opportunistic behavior of managers.

Suggested Citation

  • Paolo Saona & Laura Muro, 2018. "Firm- and Country-Level Attributes as Determinants of Earnings Management: An Analysis for Latin American Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(12), pages 2736-2764, September.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:12:p:2736-2764
    DOI: 10.1080/1540496X.2017.1410127
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    Cited by:

    1. Katarina Valaskova & Peter Adamko & Katarina Frajtova Michalikova & Jaroslav Macek, 2021. "Quo Vadis, earnings management? Analysis of manipulation determinants in Central European environment," Oeconomia Copernicana, Institute of Economic Research, vol. 12(3), pages 631-669, September.
    2. Wil Martens & Prem Yapa & Maryam Safari, 2021. "Earnings Management in Frontier Market: Do Institutional Settings Matter?," Economies, MDPI, vol. 9(1), pages 1-19, February.
    3. Abel Oghenevwoke Ideh & Edirin Jeroh & Orits Frank Ebiaghan, 2021. "Board Structure of Corporate Organizations and Earnings Management: Does Size and Independence of Corporate Boards Matter for Nigerian Firms?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(1), pages 329-338, January.
    4. Paolo Saona & Laura Muro & Pablo San Martín & Carlos Cid, 2020. "Ibero-American corporate ownership and boards of directors: implementation and impact on firm value in Chile and Spain," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 2138-2170, January.

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