The Joint Effect of Audit Quality and Legal Regime on the Use of Real Earnings Management: International Evidence

• 발행기관: 한국산업경영학회
• 저자명: Ahrum Choi Jong-Hag Choi Byungcherl Charlie Sohn Current Version
• 간행물 정보: 『한국산업경영학회 발표논문집』2013년도 동계학술대회 발표논문집, 1~49쪽, 전체 48쪽
• 주제분류: 경제경영 > 경영학
• 파일형태: PDF
• 발행일자: 2013.02.22

영문 초록

This study investigates whether and how a firm’s real earnings management (REM) activities are influenced by the strength of a country’s legal regime, and then examines whether the role of Big 4 auditors to constrain REM is different between countries with strong and weak legal regimes. Using 36,927 firm-year observations from 25 countries across the world, we find that the intensity of REM increases as a country’s legal regime strengthens because more firms switch from accrual-based earnings management (AEM) to REM, suggesting a substitutive relation between AEM and REM. We find, however, that this increased use of REM in countries with stronger legal regimes is less pronounced for the clients of Big 4 auditors than for those of non-Big 4 auditors. These findings suggest that the high-quality audit service provided by Big 4 auditors reduces the client firms’ tendency to use REM, especially in countries with a strong legal regime.

목차

Abstract

1. Introduction

2. Summary of prior studies and hypothesis development

3. Research design

4. Sample, data, and empirical results

5. Sensitivity tests

6. Conclusion

References

키워드

Real earnings management legal regime audit quality