Policy Uncertainty and Accounting Quality

• 成果类型: Article
• 署名作者: El Ghoul, Sadok; Guedhami, Omrane; Kim, Yongtae; Yoon, Hyo Jin
• 署名单位: University of Alberta; University of South Carolina System; University of South Carolina Columbia; Santa Clara University; Korea Advanced Institute of Science & Technology (KAIST); University of Texas System; University of Texas El Paso
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2018-0057
• 发表日期: 2021
• 页码: 233-260
• 关键词: earnings management; institutional investors; political uncertainty; long-run; performance; MARKET; INVESTMENT; equity; disclosure; attention

摘要

Using data from 19 countries over the 1990-2015 period, we examine how economic policy uncertainty (EPU) affects accounting quality. We find that accounting quality, measured based on Nikolaev's (2018) model, increases during periods of high policy uncertainty. This relation is confirmed by the negative association between EPU and performance-adjusted discretionary accruals in a multivariate setting, and it extends to various alternative measures of earnings properties. We also find that the positive relation between EPU and accounting quality is more pronounced for government-dependent firms and firms with higher political risk. Additional analyses based on institutional investors' trading behavior, media freedom, and press circulation suggest that market participants' attention is a mechanism through which EPU affects accounting quality. Further, we find evidence that high accounting quality can mitigate the negative effects of EPU on corporate investment and valuation.