Abstract
This paper investigates the quality of domestic and foreign earnings shaped by manager's reporting incentives for international operations. Firstly, it shows that foreign earnings are reported less conservatively and reduces earnings quality. Secondly, loss in foreign operations may result in manager's conservative reporting for contracting or litigation risk. This signaling or alarming effect would increase with portions of foreign sales. Thirdly, this study suggests that the Sarbane Oxley Act 2000 has no significant impact on the quality of foreign earnings. Our study offers implications for assessing decomposed earnings quality and also on regulations that improve earnings quality under globalization economy.
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