Auditor Reputation and Earnings Management: International Evidence from the Banking Industry

By Kiridaran Kanagaretnam, C. Lim, Gerald J. Lobo. 2010

252 citations recorded by the source corpus.

We examine the relation between auditor reputation and earnings management in banks using a sample of banks from 29 countries. In particular, we examine the implications of two aspects of auditor reputation, auditor type and auditor industry specialization, for earnings management in banks. We find that both auditor type and auditor industry specialization moderate benchmark-beating (loss-avoidance and just-meeting-or-beating prior year's earnings) behavior in banks. In addition, we find that once auditor type and auditor industry specialization are included in the same tests, only auditor industry specialization has a significant impact on constraining benchmark-beating behavior. In separate tests related to income-increasing abnormal loan loss provisions, we find that both auditor type and auditor expertise constrain income-increasing earnings management. Again, in joint tests, only auditor industry expertise has a significant impact on constraining income-increasing earnings management.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/a66adbc443779b9859d38326c5632f1c48782966

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In Accounting

1. Peterson K. Ozili
2. E. Outa
3. David Mhlanga

In Finance

1. Peterson K. Ozili
2. E. Outa

Citations in the corpus

• Bank Income Smoothing, Ownership Concentration and the Regulatory Environment (2014, unknown): “Indeed, empirical evidence has been provided that Big Four auditors constrain the earnings management of firms (e.g. DeFond and Jiambalvo 1991, Becker et al. 1998 and Kanagaretnam et al. 2010).”
• Do Islamic Banks Employ Less Earnings Management (2013, unknown): “Following prior studies, such as Beatty et al. (2002), Altamuro and Beatty (2010), Burgstahler and Dichev (1997), Degeorge et al. (1999) and Kanagaretnam et al. (2010), we use two main measures to capture earnings management in the bank industry: earnings loss avoidance and abnormal loan loss…”
• Religiosity and Earnings Management: International Evidence from the Banking Industry (2014, unknown): “reputation and national culture (Shen and Chih 2005; Fonseca and Gonzalez 2008; Kanagaretnam et al. 2010b; Kanagaretnam et al. 2011).”
• Bank Loan Loss Provisions Research: A Review (2017, background): “…(see, Cavallo & Majnoni, 2002, pp. 319e342; El Sood, 2012; Bouvatier et al., 2014; Curcio & Hasan, 2015; Ozili, 2015), beginning total assets (see, Kanagaretnam et al., 2010; Kilic et al., 2012), beginning total loans (see, Bushman & Williams, 2012), gross or average loan (see, Anandarajan et…”
• Effects of national culture on earnings quality of banks (2011, unknown): “Notable exceptions are Shen and Chih (2005), Fonseca and Gonzalez (2008), and Kanagaretnam, Lim, and Lobo (2010b), that examine the relations between international institutional factors, bank monitoring variables, auditor reputation, and earnings management.”