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Does the Latin model of corporate governance perform worse than other models in preventing earnings management?

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  • Carlos F. Alves
  • Ernesto Fernando R. Vicente

Abstract

Traditionally, the Latin model of corporate governance had been a predominant model in some countries; however, this model is increasingly becoming out of fashion. Using a database of Portuguese and Brazilian firms, we investigated whether the Latin model performs worse than other models (i.e. variants of the Continental and Anglo-Saxon models) in terms of preventing earnings management. We conclude that, in general, companies that adopt the Latin model have lower levels of earnings management than other companies and that switching from the Latin model to another model does not cause a generalized decrease in the level of discretionary accruals. Additionally, firms that move away from the Latin model are not predominantly those with extremely high levels of discretionary accruals.

Suggested Citation

  • Carlos F. Alves & Ernesto Fernando R. Vicente, 2013. "Does the Latin model of corporate governance perform worse than other models in preventing earnings management?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(21), pages 1663-1673, November.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:21:p:1663-1673
    DOI: 10.1080/09603107.2013.844322
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    References listed on IDEAS

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    1. Pawan Madhogarhia & Ninon Sutton & Theodor Kohers, 2009. "Earnings management practices among growth and value firms," Applied Financial Economics, Taylor & Francis Journals, vol. 19(22), pages 1767-1778.
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    7. Charles Piot & RĂ©mi Janin, 2007. "External Auditors, Audit Committees and Earnings Management in France," Post-Print halshs-00176969, HAL.
    8. Warfield, Terry D. & Wild, John J. & Wild, Kenneth L., 1995. "Managerial ownership, accounting choices, and informativeness of earnings," Journal of Accounting and Economics, Elsevier, vol. 20(1), pages 61-91, July.
    9. K.V. Peasnell & P.F. Pope & S. Young, 2005. "Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1311-1346.
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