The Relative Importance of Firm Incentives versus Country Factors in the Demand for Assurance Services by Private Entities

• 成果类型: Article
• 署名作者: Francis, Jere R.; Khurana, Inder K.; Martin, Xiumin; Pereira, Raynolde
• 署名单位: University of Missouri System; University of Missouri Columbia; Washington University (WUSTL)
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2010.01053.x
• 发表日期: 2011
• 页码: 487-+
• 关键词: investor protection; earnings quality; AGENCY COSTS; financial-statements; auditor; environment; INFORMATION; STANDARDS; MARKETS; CHOICE

摘要

A debate exists in the literature over the role of country-level institutions in shaping governance structures, and whether a firm's governance choices are voluntary and the result of firm-specific incentives, or if they are largely the consequences of broader institutional forces in a country. Specifically, do we observe good governance mainly in those countries with strong investor protection and well-developed financial markets, or can firms make voluntary improvements to their governance to compensate for weak institutions in a country? We examine this issue in the context of the voluntary demand for assurance services using a World Bank sample of 3,829 private entities from 62 widely diverse countries. There are two key findings. First, both firm-specific contracting incentives and country-level institutional characteristics are significant in explaining voluntary assurance services. This means that firm incentives are important and are not subsumed by a country's institutions. Second, we report evidence that firm incentives are relatively more important in countries with weaker institutions, which is consistent with the argument that voluntary improvements in a firm's governance structure can serve as a substitute for weak institutions that inhibit the contracting process. The implication is that accounting choices do matter and are not simply the consequence of the institutions in a country.