Earnings Management, Audit Quality and Legal Environment: An International Comparison
This paper investigates the relationship between earnings management-audit quality and earnings management-legal system quality by using 1507 firms’ observations from listed companies in private firms across different 8 emerging countries. Consistent with previous research, differentiation between Big 4 and non-Big 4 audit firms are used as a audit quality proxy and discretionary accruals are used to measure the earnings management. According to the results, only for Brazilian and Mexican companies, there is significant relationship between the discretionary accruals and audit quality. For the other countries there is not significant relationship. Furthermore efficiency of the legal system helps decrease earnings management incentives. Along with results, the big four auditors do not constrain the earnings management incentives in every emerging country but effective legal system does. In this analysis we used other earnings management related variables like the size of the firms, leverage, lagged ROA of the firms which have loss in the previous year and Tobin Q as control variables
Volume (Year): 2 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.econjournals.com|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999.
"Investor Protection and Corporate Valuation,"
NBER Working Papers
7403, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection and Corporate Valuation," Harvard Institute of Economic Research Working Papers 1882, Harvard - Institute of Economic Research.
- Jenkins, David S. & Velury, Uma, 2008. "Does auditor tenure influence the reporting of conservative earnings?," Journal of Accounting and Public Policy, Elsevier, vol. 27(2), pages 115-132.
- Bartov, Eli & Gul, Ferdinand A. & Tsui, J.S.L.Judy S. L., 2000. "Discretionary-accruals models and audit qualifications," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 421-452, December.
- Dye, Ronald A, 1993. "Auditing Standards, Legal Liability, and Auditor Wealth," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 887-914, October.
- Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, .
"Legal Determinants of External Finance,"
19443, Harvard University OpenScholar.
- RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
- Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
- Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "The effect of international institutional factors on properties of accounting earnings," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 1-51, February.
- Masahiro Enomoto & Fumihiko Kimura & Tomoyasu Yamaguchi, 2012. "Accrual-Based and Real Earnings Management: An International Comparison for Investor Protection," Discussion Paper Series DP2012-13, Research Institute for Economics & Business Administration, Kobe University, revised May 2015.
- Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
- Jerry Sun & Guoping Liu, 2011. "Client-specific litigation risk and audit quality differentiation," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(4), pages 300-316, May.
- Paul Hribar & D. Craig Nichols, 2007. "The Use of Unsigned Earnings Quality Measures in Tests of Earnings Management," Journal of Accounting Research, Wiley Blackwell, vol. 45(5), pages 1017-1053, December.
- Boonlert-U-Thai, Kriengkrai & Meek, Gary K. & Nabar, Sandeep, 2006. "Earnings attributes and investor-protection: International evidence," The International Journal of Accounting, Elsevier, vol. 41(4), pages 327-357, 012.
- Boone, Jeff P. & Khurana, Inder K. & Raman, K.K., 2010. "Do the Big 4 and the Second-tier firms provide audits of similar quality?," Journal of Accounting and Public Policy, Elsevier, vol. 29(4), pages 330-352, July.
- VAN TENDELOO, Brenda & VANSTRAELEN, Ann, 2005.
"Earnings management and audit quality in Europe: Evidence from the private client segment market,"
2005012, University of Antwerp, Faculty of Applied Economics.
- Brenda Van Tendeloo & Ann Vanstraelen, 2008. "Earnings Management and Audit Quality in Europe: Evidence from the Private Client Segment Market," European Accounting Review, Taylor & Francis Journals, vol. 17(3), pages 447-469.
- Subramanyam, K. R., 1996. "The pricing of discretionary accruals," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 249-281, October.
When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2012-04-8. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilhan Ozturk)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.