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Firm Informativeness, Information Environment, and Accounting Quality in Emerging Countries

Author

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  • Orleans Silva Martins

    (Department of Finance and Accountancy, Federal University of Paraíba, PPGCC/CCSA, UFPB, University City, João Pessoa-PB 58051-900, Brazil)

  • Lucas Ayres Barreira de Campos Barros

    (Department of Accountancy and Actuarial Science, University of São Paulo, FEA/USP, Avenue Professor Luciano Gualberto, 908, Butantã, São Paulo-SP 05508-010, Brazil)

Abstract

Using standard proxies for accounting quality, with a focus on earnings persistence and earnings management, we examine how the association between firm-level informativeness and accounting quality varies according to the quality of the country-level information environment. Our sample comprises over 15,000 publicly traded firms from 21 countries included in the Morgan Stanley Capital International (MSCI) Emerging Markets Index, between the years 2000 and 2016. Using novel proxies that aggregate several firm- or country-level characteristics associated with lower information asymmetry or higher-quality information environment, we find that in emerging markets with weaker information environments, the positive association between firm-level informativeness and accounting quality is more pronounced, suggesting that greater firm-level informativeness may partially compensate for weaker country-level institutions. Consistent with the substitution effect, we also document that the positive association between firm-level informativeness and stock market performance is greater in emerging countries with weaker information environments.

Suggested Citation

  • Orleans Silva Martins & Lucas Ayres Barreira de Campos Barros, 2021. "Firm Informativeness, Information Environment, and Accounting Quality in Emerging Countries," The International Journal of Accounting (TIJA), World Scientific Publishing Co. Pte. Ltd., vol. 56(01), pages 1-50, March.
    • Handle: RePEc:wsi:tijaxx:v:56:y:2021:i:01:n:s1094406021500049
    DOI: 10.1142/S1094406021500049
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    Cited by:

    1. Viana, Jr., Dante Baiardo C. & Lourenço, Isabel & Black, Ervin L. & Martins, Orleans Silva, 2023. "Macroeconomic instability, institutions, and earnings management: An analysis in developed and emerging market countries," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).

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