TY - JOUR
T1 - The Joint Effect of Audit Quality and Legal Regimes on the Use of Real Earnings Management
T2 - International Evidence
AU - Choi, Ahrum
AU - Choi, Jong Hag
AU - Sohn, Byungcherl Charlie
N1 - Funding Information:
* Accepted by Jeff Pittman. We appreciate the helpful comments provided by two anonymous reviewers, Bok Baik, Chih-Ying Chen, Sunhwa Choi, Sung Gon Chung, Beng Wee Goh, In-Mu Haw, Lee-Seok Hwang, Jim Irving, Jeong-Bon Kim, Seil Kim, Byungjin Kwak, Jay Junghun Lee, Joonil Lee, Yujin Lee, Chee Yeow Lim, Jeffrey Pittman, Hyuk Shawn, Catherine Sonu, Michael Welker, Yoonseok Zang, Gaoguang Stephen Zhou; by other seminar participants at the Korea Advanced Institute of Science and Technology, Kyungil University, Seoul National University, Singapore Man-agement University, and Sungkyunkwan University; and by conference participants at the Korean Accounting Associa-tion’s annual meeting, the Korea Management Association’s annual meeting, and the AAA annual meeting. Ahrum Choi gratefully acknowledges financial support provided by Hong Kong Baptist University. Jong-Hag Choi gratefully acknowledges financial support provided by Samil PwC Research fellowship and the Institute for Management Research at Seoul National University. Byungcherl Charlie Sohn gratefully acknowledges financial support by University of Macau (SRG2013-00049-FBA). Correction added on 11 December 2018, after first online publication: Changes were made to correct grammar, spelling, and to conform to journal editorial style. † Corresponding author.
PY - 2018/12/1
Y1 - 2018/12/1
N2 - This study investigates whether and how a firm's real earnings management (REM) is influenced by the strength of a country's legal regime and the presence of a Big 4 auditor. In a cross-country examination using data from 22 countries, we find that REM increases in countries with stronger legal regimes as firms switch from accrual-based earnings management (AEM) to REM. The presence of a Big 4 auditor reduces REM (as well as AEM) and attenuates the positive relation between legal regime strength and REM. Our results suggest that higher-quality auditors limit client firms’ use of REM, especially in countries with a strong legal regime.
AB - This study investigates whether and how a firm's real earnings management (REM) is influenced by the strength of a country's legal regime and the presence of a Big 4 auditor. In a cross-country examination using data from 22 countries, we find that REM increases in countries with stronger legal regimes as firms switch from accrual-based earnings management (AEM) to REM. The presence of a Big 4 auditor reduces REM (as well as AEM) and attenuates the positive relation between legal regime strength and REM. Our results suggest that higher-quality auditors limit client firms’ use of REM, especially in countries with a strong legal regime.
UR - http://www.scopus.com/inward/record.url?scp=85048177265&partnerID=8YFLogxK
U2 - 10.1111/1911-3846.12370
DO - 10.1111/1911-3846.12370
M3 - Journal article
AN - SCOPUS:85048177265
SN - 0823-9150
VL - 35
SP - 2225
EP - 2257
JO - Contemporary Accounting Research
JF - Contemporary Accounting Research
IS - 4
ER -