The Spillover of SOX on Earnings Quality in Non-U.S. Jurisdictions

2015 ◽  
Vol 30 (1) ◽  
pp. 23-39 ◽  
Author(s):  
Wouter Dutillieux ◽  
Jere R. Francis ◽  
Marleen Willekens
Keyword(s):  
Earnings Quality ◽  
Control Sample ◽  
Spillover Effects ◽  
Data Availability ◽  
Institutional Setting ◽  
Sarbanes Oxley ◽  
Before And After ◽  
Flow Through ◽  
The U.S

SYNOPSIS In most European countries, U.S.-owned subsidiaries are required by law to file separate entity financial statements in local GAAP. We use this unique institutional setting to examine whether the Sarbanes-Oxley Act of 2002 (SOX) had a flow-through effect on the earnings quality of local GAAP financial reports for a sample of Belgian subsidiaries owned by U.S.-listed firms. Belgium has weaker institutions relative to the U.S. and this is a setting where the spillover effects of SOX might be expected to improve local GAAP earnings quality. Using a difference-in-differences research design, we compare changes in earnings quality before and after SOX for a treatment sample of Belgian subsidiaries owned by U.S.-listed companies (which are subject to SOX), with a control sample of Belgian-owned subsidiaries whose owners are not subject to SOX regulations. We find that the earnings quality of the U.S.-owned subsidiaries improved after SOX (smaller abnormal accruals and more timely loss recognition). In contrast, the earnings quality of the control sample was either unchanged or declined in the pre- versus post-SOX periods. These results suggest that SOX did have a flow-through effect on earnings quality in a non-U.S. jurisdiction, and that SOX has had a broader international effect beyond the original legislative intent. Data Availability: Data are available from sources identified in the paper.

U.S.-Listed Foreign Companies' Choice of a U.S.-Based versus Home Country-Based Big N Principal Auditor and the Effect on Audit Fees and Earnings Quality

2015 ◽  
Vol 29 (3) ◽  
pp. 631-666 ◽  
Author(s):  
Sharad C. Asthana ◽  
K. K. Raman ◽  
Hongkang Xu
Keyword(s):  
Financial Reporting ◽  
Home Country ◽  
Earnings Quality ◽  
Audit Fees ◽  
Foreign Companies ◽  
Two Factors ◽  
Just Price ◽  
Reporting Environment ◽  
The U.S

SYNOPSIS We examine why U.S.-listed foreign companies choose to have a U.S.-based (rather than home country-based) Big N firm as their principal auditor for SEC reporting purposes and the effects of that choice for audit fees and earnings quality. We find that the likelihood of the Big N principal auditor being U.S.-based is decreasing in client size and the level of investor protection in the home country, and increasing in the proportion of income earned outside the home country. We also find compelling evidence that U.S.-based Big N auditors are associated with higher-quality earnings (albeit for a higher fee), despite two factors—the greater distance between the U.S.-based (vis-à-vis home country-based) Big N auditor and the client, and the likelihood that much of the audit work is done outside the U.S.—which potentially could lower the earnings quality of the U.S.-listed foreign client when the Big N principal auditor is U.S.-based. Overall, our study suggests that the higher fees associated with a U.S.-based Big N principal auditor is not just price protection; rather, U.S.-based Big N principal auditors are also improving the financial reporting environment by reporting higher-quality audited earnings for their U.S.-listed foreign clients. JEL Classifications: L11; L15; M42.

scholarly journals Heterogeneity in earnings quality between different classes of companies after IFRS adoption: evidence from Brazil

2017 ◽  
Vol 28 (73) ◽  
pp. 113-131
Author(s):  
Roberto Black ◽  
Sílvio Hiroshi Nakao
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Earnings Quality ◽  
Economic Incentives ◽  
Net Income ◽  
Accounting Earnings ◽  
Ifrs Adoption ◽  
Before And After

ABSTRACT This paper aims to investigate the existence of heterogeneity in earnings quality between different classes of companies after the adoption of the International Financial Reporting Standards (IFRS). IFRS adoption is generally associated with an increase in the quality of financial statements. However, companies within the same country are likely to have different economic incentives regarding the disclosure of information. Thus, treating companies equally, without considering the related economic incentives, could contaminate earnings quality investigations. The case of Brazil is analyzed, which is a country classified as code-law, in which tax laws determined accounting practice and in which IFRS adoption is mandatory. First, Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) were separated into two classes: companies issuing American Depositary Receipts (ADRs) before IFRS adoption and companies that did not issue ADRs until the adoption of IFRS. Then, this second class of companies was grouped, using cluster analysis, into two different subclasses according to economic incentives. Based on the groups identified, the quality of accounting earnings is tested for each class of the companies before and after IFRS adoption. This paper uses timely recognition of economic events, value relevance of net income, and earnings management as proxies for the quality of accounting earnings. The results indicate that a particular class of companies began showing conditional conservatism, value relevance of net income, and lower earnings management after IFRS adoption. On the other hand, these results were not found for the two other classes of companies.

scholarly journals Pengaruh Pemasangan Poster Anjuran Buang Sampah terhadap Pemanfaatan Tempat Sampah di Tempat Wisata

2019 ◽  
Vol 14 (2) ◽  
pp. 149
Author(s):  
Nining Prastiwi ◽  
Zahroh Shaluhiyah ◽  
Farid Agushybana
Keyword(s):  
Control Sample ◽  
Total Sample ◽  
Control Group ◽  
Tourist Destinations ◽  
Intervention Area ◽  
Before And After ◽  
Post Test ◽  
And Behavior ◽  
Vacation Period

Background: Cleanliness of tourist area is managers and visitors responsibilities to maintain the beauty of tourist destinations. Disposing of trash in its place becomes very important in maintaining the cleanliness of tourist sites. The role of health promotion media to improve awareness and behavior of tourist in maintaining cleanliness is necessary to be conducted. The purpose of this study was to analyze the effect of providing garbage disposal posters towards the utilising trash bin in tourist sites.Method: This study employs a quantitative method with a quasy experimental approach, non randomized control group pretest posttest design. It was carried out in four tourist sites which consist of two tourist sites as intervention area and the others as control. Sample of this study was consisted of 15 bins/each site which met the criteria of sanitation standards and selected purposively so that the total sample was 30 bins in the intervention and 30 bins in the control areas. The variables included the volume of waste in each trash bin, the quality of trash bin distributed and the number of visitors before and after intervention. Measurements were conducted for 14 days.Results: The volume of waste was increased significantly after providing posters in the intervention sites compared to controls’. Likewise, the quality of trash bin distributed at tourist sites was also increased significantly in the intervention areas compared to controls. The number of visitors at four destinations was increased significantly after intervention because post-test was conducted at long vacation period. That would directly effect to waste volume in the trash bin at 4 tourist destinations. This study recommends to managers to put interesting poster or other instagramable media to promote healthy behaviour related to the cleanliness and beauty at tourist areas.

Managerial Ability and Earnings Quality

2012 ◽  
Vol 88 (2) ◽  
pp. 463-498 ◽  
Author(s):  
Peter R. Demerjian ◽  
Baruch Lev ◽  
Melissa F. Lewis ◽  
Sarah E. McVay
Keyword(s):  
Earnings Quality ◽  
Data Availability ◽  
Managerial Ability ◽  
Bad Debt

ABSTRACT We examine the relation between managerial ability and earnings quality. We find that earnings quality is positively associated with managerial ability. Specifically, more able managers are associated with fewer subsequent restatements, higher earnings and accruals persistence, lower errors in the bad debt provision, and higher quality accrual estimations. The results are consistent with the premise that managers can and do impact the quality of the judgments and estimates used to form earnings. Data Availability: Data are publicly available from the sources identified in the text.

Profits in Medicine: A Context and an Accounting

1978 ◽  
Vol 8 (1) ◽  
pp. 41-54 ◽  
Author(s):  
Gelvin Stevenson
Keyword(s):  
Health Care ◽  
Final Section ◽  
Health Care Expenditures ◽  
Relative Growth ◽  
Non Profit ◽  
Price Controls ◽  
For Profit ◽  
Before And After ◽  
The U.S

The U.S. health care industry is composed of a dynamic mixture of profit and non-profit entities. These sectors sometimes compete in the same activities and may have virtual monopolies over other activities. Estimates of the relative and absolute sizes and growth trends of the profit and non-profit sectors are developed in this article. These estimates show that approximately 39 percent of total health care expenditures in the U.S. in 1975 went to for-profit institutions, generating $3.3 billion in profit. This represented 7 percent of for-profit and 2.8 percent of total expenditures. Some for-profit subsectors grew more rapidly and others less rapidly than total health care expenditures. As a whole, the for-profit sector grew faster than the non-profit sector before and after Medicare and Medicaid were introduced as well as during the period when price controls were in effect. The relative growth of the for-profit sector was greatest right after the introduction of Medicare and Medicaid. The true significance of profit lies not in numbers, but in the effects that the drive for profit have on the nature and quality of health and health care. This is discussed in the final section.

How Would the Mandatory Adoption of IFRS Affect the Earnings Quality of U.S. Firms? Evidence from Cross-Listed Firms in the U.S.

2011 ◽  
Vol 25 (4) ◽  
pp. 837-860 ◽  
Author(s):  
Jerry Sun ◽  
Steven F. Cahan ◽  
David Emanuel
Keyword(s):  
Earnings Quality ◽  
Discretionary Accruals ◽  
Earnings Persistence ◽  
Listed Firms ◽  
Ifrs Adoption ◽  
The Cross ◽  
The Impact ◽  
Timely Loss Recognition ◽  
The U.S

SYNOPSIS We examine the impact of IFRS adoption on the earnings quality of foreign firms cross-listed in the U.S. from countries that have already adopted IFRS on a mandatory basis. We use the cross-listed firms as surrogates for the U.S. firms so we can observe the effect of IFRS adoption in the U.S. We examine five measures of earnings quality related to discretionary accruals, target beating, earnings persistence, timely loss recognition, and the earnings response coefficient (ERC). To isolate the effect of IFRS adoption, we use a matched sample design where each cross-listed firm is matched to a U.S. firm. We find the difference in earnings quality from the pre- to post-IFRS period is not different for the cross-listed and matched firms when earnings quality is measured by absolute discretionary accruals, timely loss recognition, or a long-window ERC. However, for the incidence of small positive earnings and earnings persistence, we find significant difference-in-differences, indicating that IFRS adoption led to an improvement in earnings quality for cross-listed firms relative to the matched firms. Our results are slightly surprising since U.S. GAAP is generally viewed as high-quality standards with little room for improvement.

scholarly journals Earnings quality before and after the implementation of PSAK 69

Accounting ◽  
2021 ◽  
pp. 727-734 ◽  
Author(s):  
Naniek Noviari ◽  
I Gusti Ayu Eka Damayanthi ◽  
I Gusti Ngurah Agung Suaryana
Keyword(s):  
Financial Reporting ◽  
Agricultural Sector ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Fair Value ◽  
Cross Sectional ◽  
Current Period ◽  
Before And After ◽  
Earnings Response

PSAK 69 Agriculture regulates the accounting treatment of agricultural activities in Indonesia. The measurement of biological assets is the most important part of the arrangement of PSAK 69. PSAK 69 deals with biological assets measured at fair value less costs to sell at the beginning and end of the reporting period. Characteristics of growing biological assets will have an impact on the growth in fair value of assets, so there will be differences in fair value at the beginning and end of the financial reporting period. The difference in fair value of biological assets, whether realized or not, is recognized as gain in the current period. This will have an impact on the quality of the company's earnings. This study aims to examine differences in earnings quality before and after the implementation of PSAK 69 in agricultural sector companies listed on the Indonesia Stock Exchange. The research was conducted on 14 agricultural companies listed on the Indonesia Stock Exchange in the 2016-2019 observation period. Earnings quality is measured by the earnings response coefficient. Earnings response coefficients are estimated using the firm specific coefficient model (FSCM) and pooled cross-sectional regression model (CSRM) methods. This study measures the quality of earnings before and after the application of PSAK 69. The quality of earnings before and after the application of PSAK 69 is tested by a paired two-sample t-test. The results of this study found no difference in earnings quality before and after the application of PSAK 69.

Capital Structure, Earnings Management, and Sarbanes-Oxley: Evidence from Canadian and U.S. Firms

2013 ◽  
Vol 27 (2) ◽  
pp. 301-318 ◽  
Author(s):  
Kelly E. Carter
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Data Availability ◽  
Cost Of Debt ◽  
Equity Financing ◽  
Percentage Points ◽  
Sarbanes Oxley ◽  
The U.S ◽  
Jel Classifications

SYNOPSIS I examine Sarbanes-Oxley's (SOX) effect on capital structure. I find that SOX is associated with higher long-term debt ratios, as firms listed in the U.S. raise their long-term debt ratios by 2 to 3 percentage points. This finding is consistent with the idea that, although the reduction in information asymmetry associated with SOX could prompt managers to increase equity financing, debt is still safer and less costly than equity in the SOX era. Further analysis shows that the increase in debt occurs in the two quarters prior to SOX, suggesting that firms anticipate a higher cost of debt after SOX and acquire debt while it is relatively cheap. Also, firms that heavily (lightly) manage earnings prior to SOX use less (more) debt after SOX. This result is consistent with the view that firms that aggressively manage earnings before SOX reveal intrinsically weaker earnings after SOX, casting doubt on those firms' ability to repay debt and relegating those firms to issue equity for financing purposes. JEL Classifications: G32; G38. Data Availability: Data available upon request.

Sign in / Sign up

Export Citation Format

Share Document