Earnings quality in privately held firms : the roles of external audits, stakeholders, and governance mechanisms
Abstract
While the extant empirical literature on earnings management focuses on incentives, constraints and consequences in US listed companies, we present results on nonlisted companies that operate in a continental European environment (Belgium); and we consider not just the effects of internal mechanisms and external auditing but also of stakeholder relations. Methodologically, special care is taken of an errors-in-variables problem induced by a two-step procedure. We find clear evidence that earnings are managed (downward) for tax purposes, but also that relationships with banks and suppliers act as a restraining factor in this field. Another factor of moderation of downward manipulation appears to be a large board. Employee power does not seem to affect accruals management. Lastly, in our sample, audit quality does not exhibit any statistically clear relation with the auditor's visibility (for instance, big-N or not).Download Info
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Paper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/224436.Length:
Date of creation: 2002
Date of revision:
Handle: RePEc:ner:leuven:urn:hdl:123456789/224436
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Web page: http://www.kuleuven.be
Related research
Keywords: Audit quality; Auditing; Companies; Earnings management; Effects; Governance;References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Beuselinck Ch. & Deloof M., 2006.
"Business groups, taxes and accruals management,"
Working Papers
2006015, University of Antwerp, Faculty of Applied Economics.
- Beuselinck, C.A.C. & Deloof, M., 2006. "Business Groups, Taxes and Accruals Management," Discussion Paper 2006-46, Tilburg University, Center for Economic Research.
- S. Verbruggen & J. Christiaens & A. Reheul & T. Van Caneghem, 2011. "Audit pricing in a reformed nonprofit market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/764, Ghent University, Faculty of Economics and Business Administration.
- Verbruggen, Sandra & Christiaens, Johan & Reheul, Anne-Mie & Van Caneghem, Tom, 2011. "Audit pricing in a reformed nonprofit market," Working Papers 2011/29, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
- Reheul, Anne-Mie & Van Caneghem, Tom & Verbruggen, Sandra, 2011. "Auditor choice in the Belgian nonprofit sector: a behavioral perspective," Working Papers 2011/36, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
- Tom Van Caneghem, 2010. "Audit pricing and the Big4 fee premium: evidence from Belgium," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(2), pages 122-139, February.
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