Abstract
Purpose – Analyze how the characteristics of the business environment generates differences in the quality of accounting information in the international context. Design/methodology/approach – Descriptive research with a quantitative approach. Documentation collection in the Thomson Datastream Index Service database in a sample of 1,406 companies located in twelve countries, from 2005 to 2012. Findings – Companies located in countries with lower tax burden, stronger legal environment, greater economic and financial development index, common law legal origin and higher degree of internationalization presented higher averages and significant differences in the aggregate ranking of the quality of accounting information. The type of standard accounting used also influenced the position in the aggregate ranking of the accounting information quality. Originality/value – The interaction of companies with external markets influences the choices of accounting policies. The countries’ environmental characteristics, related to transparency, economic nature, legal and tax environment, lead to various levels of the quality of accounting information reported by companies.
Highlights
Literature reviewIt is hard to observe the quality of accounting information, and, it is difficult to be measured (Isidro & Raonic, 2012)
Companies located in countries with lower tax burden, stronger legal environment, greater economic and financial development index, common law legal origin and higher degree of internationalization presented higher averages and significant differences in the aggregate ranking of the quality of accounting information
This study presents empirical evidences that environmental characteristics of different countries related to transparency, economic nature, legal and tax environment can lead to differentiated levels in the quality of accounting information reported by companies
Summary
It is hard to observe the quality of accounting information, and, it is difficult to be measured (Isidro & Raonic, 2012). There is no general agreement nor a predominant approach to measure the quality of the accounting results due to the attributes that can be mutually incompatible or overlapping, interconnected, and cannot be considered separately (Yoon, 2007). There is no agreement regarding the quality of accounting information definition, the different dimensions that form its construct were operationalized in previous researches. The definitions of the quality of profits include the high persistence of profit in a time series; profits that represent accurately the economic implications of underlying operations; the ratio of earnings in relation to operating cash flows; accruals of working capital mapped in past, present and future cash flows (McNichols, 2002). This study considers the quality of accounting information based on the individual ranking by company, which is composed by four attributes of profits based on the accounting: quality of accruals, persistence, predictability and smoothing of earnings
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