What Determines Financial Reporting Quality Changes?
Speaker
Abstract
| I empirically investigate financial reporting quality across 44 countries between 1991 and 2007. I define financial reporting quality as the usefulness of earnings numbers to those outside publicly traded firms. In order to explore the relation between institutional factors and accounting practice more accurately, I contribute to prior literature by focusing on the impact of institutional changes on financial reporting quality. Thereby, I propose the use of benefit-of-the-doubt composite indicators to capture the underlying institutional and accounting constructs. My findings suggest that positive institutional changes result in an increasing financial reporting quality and vice versa. This relation holds when controlling for differences in accounting standards, firm and macroeconomic factors. My main result is that in countries with growing external capital markets and a declining political involvement in capital markets register significant increases in financial reporting quality, whereas legal quality changes only appear to have a modest impact. |
| Contact information: |
| Paolo Perego |
