Earnings opacity internationally and elements of social, economic and accounting order
Fouad K. AlNajjar
Purpose – The purpose of this paper is to identify and test the determinates of earnings opacity internationally. The determinates are hypothesized to be the elements of social, economic and accounting order in each of the 34 countries of the study. Design/methodology/approach – A sample of 34 countries’ data was collected and data estimation and several statistical and correlations were performed. Findings – Earnings opacity internationally is negatively related to the levels of economic freedom and quality of life, and positively related to rule of law, economic growth and level of corruption. Further, the findings are surprising that the level of disclosure, the number of auditors per 100,000 inhabitants and the adoption of international accounting standards (as elements of the accounting order) are not significantly related to earnings opacity internationally. It is the social and economic climate rather than the technical accounting climate that is at the core of the lack of accounting quality in general and earnings opacity in particular. Originality/value – Elements of accounting order do not seem to affect earnings opacity as much as social and economic characteristics. It is the economic and the social context rather than the technical that explicates better the level of accounting quality in general and the level of earnings opacity in particular in a given country. Earnings opacity is higher as a result of higher rule of law, economic growth and level of corruption, and lower as result of higher level of economic freedom and quality of life.
Accounting, Earnings, International accounting, International economics
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