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The Relative Importance of Firm and Country Characteristics for Earnings Quality around the World

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  • Cristina Gaio

Abstract

We examine the relative importance of firm, industry and country characteristics in explaining earnings quality in a wide sample of firms in 38 countries over 1990-2003. An aggregate earnings quality measure based on seven earnings attributes (accruals quality, persistence, predictability, smoothness, value relevance, timeliness and conservatism) indicates firm and industry characteristics today explain much more of the variation in earnings quality rankings than country characteristics. The main results hold for different levels of a country's economic development and investor protection. We also find that firm and industry characteristics became more important in the late 1990s as accounting and financial globalization accelerated. Thus, firm and industry characteristics have incremental explanatory power beyond cross-country variation in determining earnings quality worldwide.

Suggested Citation

  • Cristina Gaio, 2010. "The Relative Importance of Firm and Country Characteristics for Earnings Quality around the World," European Accounting Review, Taylor & Francis Journals, vol. 19(4), pages 693-738.
  • Handle: RePEc:taf:euract:v:19:y:2010:i:4:p:693-738
    DOI: 10.1080/09638180903384643
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    Citations

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    Cited by:

    1. Persakis, Anthony & Iatridis, George Emmanuel, 2015. "Earnings quality under financial crisis: A global empirical investigation," Journal of Multinational Financial Management, Elsevier, vol. 30(C), pages 1-35.
    2. Silvia Gardini & F. Marta L. Di Lascio & Franco Visani, 2017. "How cultural and contextual variables affect the disclosure and transparency of pro-forma indicators," BEMPS - Bozen Economics & Management Paper Series BEMPS41, Faculty of Economics and Management at the Free University of Bozen.
    3. Fujiyama, Keishi & Kagaya, Tetsuyuki & Suzuki, Tomohiro & Takahashi, Yukari, 2014. "Quarterly Earnings Management Around The World: Loss Avoidance Or Earnings Decrease Avoidance?," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 48(1), pages 1-30, January.
    4. Dean Katselas & Jacqueline Birt & Xin Hao Kang, 2011. "International Firm Lobbying and ED 8 Operating Segments," Australian Accounting Review, CPA Australia, vol. 21(2), pages 154-166, June.
    5. repec:eee:riibaf:v:42:y:2017:i:c:p:321-337 is not listed on IDEAS
    6. André, Paul & Filip, Andrei & Paugam, Luc, 2013. "Impact of Mandatory IFRS Adoption on Conditional Conservatism in Europe," ESSEC Working Papers WP1311, ESSEC Research Center, ESSEC Business School.
    7. Domenico Campa & María del Mar Camacho Miñano, 2013. "Opportunistic earnings manipulation among bankrupt unlisted firms - How and when they do that -
      [Manipulación de resultados oportunista entre empresas en concurso no cotizadas – cómo y cuando lo ha
      ," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 13-05, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    8. Ferrer García, Cristina & Laínez Gadea, José Antonio, 2013. "Detectando diferencias en la medición de la calidad del resultado: evidencia empírica para empresas españolas || Detecting Differences on the Earnings Quality Measurement: Empirical Evidence on Spanis," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 16(1), pages 5-28, December.
    9. repec:hal:journl:hal-00862683 is not listed on IDEAS
    10. Silvia Gardini & F. Marta L. Di Lascio & Franco Visani, 2017. "Opportunism in disclosing pro-forma indicators: rationale and contextual drivers," BEMPS - Bozen Economics & Management Paper Series BEMPS42, Faculty of Economics and Management at the Free University of Bozen.
    11. Paul André & Andrei Filip & Luc Paugam, 2015. "The Effect of Mandatory IFRS Adoption on Conditional Conservatism in Europe," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(3-4), pages 482-514, April.

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