A Comparison of Between‐Country Measures of Legal Setting and Enforcement of Accounting Standards

Journal of Business Finance and Accounting - Tập 42 Số 1-2 - Trang 1-50 - 2015
John P. Preiato, Philip Brown, Ann Tarca1
1The first author is from University of Western Australia. The second author is from the University of New South Wales and the University of Western Australia. The third author is from the Business School, University of Western Australia. Thanks are due to the UWA Business School for research funds and Jonathon Burrows and Jonathan Seow for research assistance. The authors also thank the Editors (Andrew Stark, Peter Pope and Martin Walker) for their comments, and appreciate feedback on earlier versions of this paper from Yael Almog, Mary Barth, Mike Bradbury, David Cairns, Julie Cotter, Philippe Danjou, Holger Erchinger, Carol Ann Frost, Keith Godfrey, Niclas Hellman, Anja Hjelström, Martin Hoogendorn, H.Y. Izan, Howell Jackson, Sei-Ichi Kaneko, Chris Nobes, Jim Ohlson, Carol Page, Katherine Schipper, Peter Verhoeven, Marvin Wee, Wei Guo Zhang and seminar participants at Cass Business School City University, King's College University of London, Catholic University Leuven, Stanford University, Stockholm School of Economics, University of Sydney, University of Technology Sydney's 2010 Accounting Symposium, the Accounting and Finance Association of Australia and New Zealand (AFAANZ) annual meeting Adelaide 2009, the American Accounting Association (AAA) annual meeting New York 2009, the European Accounting Association (EAA) annual meeting Ljubljana 2012, the South African Academic Accounting Association (SAAAA) annual meeting George 2011, the AFAANZ conference Auckland 2014, and the IFRS Foundation 2012.

Tóm tắt

AbstractAcademics and practitioners agree that the enforcement of accounting standards has an important role in promoting high quality financial reporting and favourable capital market outcomes. We test three new enforcement proxies from Brown, Preiato and Tarca (2014) that focus specifically on auditing and accounting enforcement. We examine firms’ information environments, represented by the error in analysts’ consensus forecasts and the extent of disagreement among analysts, as indicated by forecast dispersion. For financial years ending from 2003 to 2009, we construct a sample of 357,034 firm–month observations on the errors and dispersion of analysts’ earnings forecasts for 10,769 firms domiciled in those 39 countries. We find that higher scores for all three proxies are associated with lower error and less disagreement in forecasts. In addition, we find that the indices have significant explanatory power when previously used enforcement proxies (such as Kaufmann et al.'s 2010 rule of law measure) are included in the regression models, pointing to the importance of specific measures of accounting enforcement. We conclude that accounting enforcement may be more important in securing favourable economic outcomes than has been previously realised, because researchers commonly have used noisier, more general legal proxies for enforcement that understate its marginal effects.

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Thông tin xuất bản

Journal of Business Finance and Accounting

Tập 42 Số 1-2

1-50

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