Incentives versus standards: properties of accounting income in four East Asian countries

Ball, Ray; Robin, Ashok; Wu, Joanna Shuang

doi:10.1016/j.jacceco.2003.10.003

Cited by 1,755 publications

(1,366 citation statements)

References 30 publications

(33 reference statements)

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“…Higher accounting quality is attributed to incentives related to institutional factors engaged in reporting earnings that reflect economic reality. Ball et al (2003) find that firms located in common-law countries present the same level of accounting quality when compared with firms in code-law countries, with respect to the timeliness of loss recognition. Authors explain that the incentives related to market and political forces affect the incentives of preparers of financial information.…”

Section: Ifrs Adoption and Earnings Managementmentioning

confidence: 79%

“…The IFRS are more rigorous about accounting alternatives and measurement requirements, which reduces the range for accounting options and limits management opportunistic discretion in determining accounting amounts. Consequently, restricting opportunistic behavior implies a reduction of eventual manipulations and increases the extent to which financial statements reflect firms' real economic positions (Ashbaugh & Pincus, 2001;Ball, Robin, & Wu, 2003).…”

Section: Ifrs Adoption and Earnings Managementmentioning

confidence: 99%

“…Ball et al (2003) argue that financial information is sensitive to the incentives borne by managers and auditors, and these incentives depend on the interplay between market and political forces. While the market demands high-quality financial reporting according to factors such as the amount of publicly traded equity, size and the amount of public debt, there are political forces related to the involvement of the Government and political incentives to reduce volatility of reported income.…”

Section: Ifrs Adoption and Firm-level Incentives: The Role Of Global mentioning

confidence: 99%

“…Besides country factors, there are firm-specific characteristics that reflect managers' incentives to prepare high-quality financial statements. According to Ball, Robin and Wu (2003), firms face external incentives affecting financial statements, which are strongly based on market and political forces, and the amount of publicly traded equity assumes a critical factor affecting accounting disclosure. In this line, some authors argue that the effect of share cross-listing in the United States is associated with a better informational environment (Lang, Lins, & Miller, 2003) and higher accounting quality (Lang, Raedy, & Yetman, 2003), thus it becomes an incentive for managers and auditors to increase transparency in financial statements (e.g., Barth et al, 2008;Chen et al, 2008).…”

Section: Introductionmentioning

confidence: 99%

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International Financial Reporting Standards and Earnings Management in Latin America

Rathke

Santana

Lourenço³

et al. 2016

Rev. adm. contemp.

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ResumoEssa pesquisa analisa o nível de gerenciamento de resultados na América Latina após a adoção das International Financial Reporting Standards (IFRS), em comparação aos países anglo-saxões e europeu-continentais. Ela também analisa o efeito da listagem de ações nos Estados Unidos sobre a comparação do nível de gerenciamento de resultados das empresas latino-americanas com empresas estrangeiras. A literatura sobre gerenciamento de resultados considerando países menos desenvolvidos ainda está em construção, e poucos estudos focam esse tema, especialmente na América Latina, apesar de sua relevância para a economia global. A presente pesquisa preenche essa lacuna por meio do exame do nível de gerenciamento de resultados nos principais países latino-americanos que adotam as IFRS (Brasil e Chile), em comparação com os principais países anglo-saxões com tradição em IFRS (Reino Unido e Austrália), e com as principais economias da Europa Continental (França e Alemanha). Os resultados demonstram que os latino-americanos apresentam um maior nível de gerenciamento de resultados que os anglo-saxões e europeu-continentais, e esse comportamento oportunista se mantém significativo quando apenas global players com listagem de ações nos Estados Unidos são analisados. Logo, mesmo com um conjunto único de padrões contábeis de elevada qualidade (IFRS) e fortes incentivos à divulgação, as características específicas dos países produzem forte influência na forma como as IFRS são implementadas em cada país. Palavras-chave: IFRS; gerenciamento de resultados; América Latina. AbstractThis study analyzes the level of earnings management in Latin America after the adoption of the International Financial Reporting Standards (IFRS) and analyzes the role of cross-listing in the United States. The literature on earnings management in less developed countries is still under construction, and few studies focus on this issue, especially with respect to Latin America, despite its relevant role in the global economy. This paper fills this gap in the literature as it analyzes the level of IFRS earnings management regarding the first and main Latin American countries applying IFRS (Brazil and Chile), when compared to the main Anglo-Saxon countries with IFRS tradition (United Kingdom and Australia), and with the main Continental European economies (France and Germany). The results show that Latin American firms present a higher level of earnings management than Continental European and Anglo-Saxon firms, and this opportunistic behavior remains significant when only global players with cross-listing in the United States are analyzed. Thus, even with a unique set of high quality accounting standards (IFRS) and strong reporting incentives, countries' specific characteristics still play an important role in the way IFRS is implemented in each country.

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Section: Ifrs Adoption and Earnings Managementmentioning

confidence: 79%

Section: Ifrs Adoption and Earnings Managementmentioning

confidence: 99%

Section: Ifrs Adoption and Firm-level Incentives: The Role Of Global mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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International Financial Reporting Standards and Earnings Management in Latin America

Rathke

Santana

Lourenço³

et al. 2016

Rev. adm. contemp.

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“…On one hand, authors such as Ball et al (2003) argue that IFRS do not necessarily produce high quality accounting information. These authors think that FRQ is determined by political and economic factors and the institutional environment itself not only by a set of rules themselves.…”

Section: Adoption Of Ifrsmentioning

confidence: 99%

Consequences of financial reporting quality on corporate performance: Evidence at the international level

Martínez‐Ferrero

2014

Estudios de Economía

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This paper examines the consequences of Financial Reporting Quality (FRQ) on Corporate Performance, using three proxies of FRQ: (i) earnings quality;(ii) conservatism; and (iii) JEL Classification: M41 Resumen Este trabajo examina las consecuencias de la Calidad de Información Financiera (FRQ) en el desempeño empresarial, con tres alternativas de FRQ: (i) earnings quality, (ii) conservadurismo, y (iii) accruals quality. Nuestro objetivo es analizar el efecto de la FRQ en el rendimiento financiero (FP) medido por el valor de mercado. A tal efecto, las hipótesis propuestas son testadas para

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Conservatism and Accounting Earnings

Inchausti

Peñalva

2015

Wiley Encyclopedia of Management

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The article refers to accounting conservatism and its relation with accounting earnings. After providing the conceptual background of the prudence concept, which is the basis of accounting conservatism, the paper introduces some more empirically testable concepts, known as conditional and unconditional conservatism. It also explains the economics behind this accounting practice, mainly associated to contracting due to the asymmetric information between managers and external stakeholders, but also linked to litigation risks, taxation, political and regulatory processes. After providing a brief explanation of the empirical measures of conservatism, it gives a summary of the vast empirical research that has evidenced the widespread use of conservatism in financial reporting and, in particular, the so‐called conditional conservatism, which suggests that bad news is included in accounting earnings in a more timely fashion than good news.

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Incentives versus standards: properties of accounting income in four East Asian countries

Cited by 1,755 publications

References 30 publications

International Financial Reporting Standards and Earnings Management in Latin America

International Financial Reporting Standards and Earnings Management in Latin America

Consequences of financial reporting quality on corporate performance: Evidence at the international level

Conservatism and Accounting Earnings

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