This study investigates the relation between accounting standards and earnings management around the world. I find that international accounting standards, accrual-based accounting standards, accounting standards with increased disclosure requirements, and separating tax and financial reporting all constrain earnings management. Following previous studies, I treat accounting standard measures as being endogenous, and use instrumental variables to re-estimate the model. I find consistent results. I conclude that accounting standard policy is an important institution in determining the quality of reported financial information. Different from prior international earnings management studies, I directly test whether international firms are managing earnings using the distribution method. I find evidence that firms are managing reported earnings around the world. I also document that high-quality accounting standards decrease analyst forecast error.
Yu, Michael D.
"ACCOUNTING STANDARDS AND EARNINGS MANAGEMENT AROUND THE WORLD,"
Journal of International & Interdisciplinary Business Research: Vol. 1
, Article 5.
Available at: http://scholars.fhsu.edu/jiibr/vol1/iss1/5