Purpose
The purpose of this paper is to examine the inter-relations among the strength of investor protection institutions, earnings management (EM) and the COVID-19 pandemic.
Design/methodology/approach
As a proxy for EM, the authors use discretionary accruals measure, estimated using the modified Jones model (1991). As a proxy for the strength of investor protection institutions, the study uses the Investor Protection Index, extracted from the Global Competitiveness Reports. The sample consists of 5,519 firms listed in the Group of Twelve countries during 2015–2020.
Findings
The study shows that firms tend to engage less in EM during the pandemic period. The authors also find a significantly negative relation between the strength of investor protection institutions and EM practices, and interestingly, this negative relation was found to be more pronounced during the pandemic period.
Research limitations/implications
For investors and practitioners, the findings help get insights into the behavior of firms in response of the pandemic shock in countries with solid institutional and legal protection. For policymakers, the findings reaffirm the critical role that institutional incentives and reforms can play, in influencing firms to exert more efforts to promote their financial reporting quality.
Originality/value
To the best of our knowledge, the study is one of the first attempts to examine the link between EM practices and investor protection during the COVID-19 pandemic. The findings extend both the literature on the role of institutional factors in promoting the earnings quality and the literature on COVID-19’s effect on firm performance and practices.
Purpose
This paper aims to examine the effect of religiosity on the degree of auditor independence given the significance of symbolic gestures constructed by client economic conditions in different situations before and after considering the degree of auditors’ moral development.
Design/methodology/approach
The paper uses an experimental design based on running mixed factorial analysis of variance (SPANOVA) using mainly repeated measures GLM to test the interaction effects between (and within) variables on auditor independence.
Findings
The main findings indicate that there is a significant interactional effect between the degree of moral development and intrinsic religiosity on the degree of auditor independence, given the stimulating effect of the client’s economic gestures/conditions.
Practical implications
The Egyptian economy is growing and ensuring that auditor independence is paramount to sustaining the local, as well as foreign investors’ interest. Hence, this study is very important in highlighting factors that might lead to some impairment of auditors’ independence.
Originality/value
To the best of the authors’ knowledge, this study is the first to test the interactional effect between the religious orientation rather than religious affiliation and moral development on the degree of auditor independence, such a relationship has not been tested before in the literature. Additionally and most importantly, it uses statistical measurement through its experimental design, as there is a lack of studies in terms of auditor independence in Egypt. The existing literature follows the perceptional assessment rather than the real measurement of the degree of auditor independence.
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