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Earnings management: an international comparison

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09 Jul 2002

Despite the accounting scandals that have surfaced recently in the United States, a study by three accounting academicians has found that the opportunities for accounting abuses are far greater in Continental Europe and Southeast Asia than in the U.S.

and the U.K. Using data for nearly 9,000 companies in 31 countries from 1990 to 1999, the researchers identified measures of the extent to which insiders can manage the 'accounting' component of reported earnings to smooth or mask the firm's economic performance -- for the insiders' own benefit. The study, titled "Investor Protection and Earnings Management: An International Comparison", highlights an important link between legal institutions and the quality of accounting earnings reported to market participants. To download the latest version of the paper, Click Here.

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