90004950

open access

Accepted Manuscript

A cross-country study on the relationship between financial development and earnings management

English (英語)

Journal of International Financial Management & Accounting

29(2)

166-194

Wiley

2018-06

2020-07-01

This paper investigates whether a country's level of financial development is associated with earnings management in an international setting. Financial development is likely to heighten the monitoring and scrutiny of accounting numbers because of strengthened investor protection laws and regulations as well as sophisticated market participants. Therefore, we first hypothesize that both accrual-based and real earnings management decrease with greater financial development. However, research shows that managers tend to apply real earnings management, instead of accrual-based earnings management, under strict accounting standards, regulations, and close auditor scrutiny. Thus, we explore the alternative hypothesis that accrual-based earnings management decreases but real earnings management increases along with higher financial development. We examine the relationship between financial development and both types of earnings management using 56,830 observations in 37 countries covering the period 2009-2012. The results indicate that both types of earnings management are more restrained under higher levels of financial development.

real earnings management

学術雑誌論文

© 2017 John Wiley & Sons Ltd. This is the peer reviewed version of the following article: [Journal of International Financial Management & Accounting, 29(2):166-194, 2018], which has been published in final form at http://dx.doi.org/10.1111/jifm.12078. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.