NDLI: Earnings Management within Multinational Corporations

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Earnings Management within Multinational Corporations

Content Provider	Semantic Scholar
Author	Beuselinck, Christof Cascino, S. Deloof, Marc Barth, Mary E. Bushman, Robert Byard, Donal Correia, Maria Dichev, Ilia Frost, Carol Ann Jørgensen, B. L. Leone, Andrew R. McNichols, Maureen F. Nanda, Dhananjay Pope, Peter G. Robinson, Leslie Stocken, Phillip Tamayo, Ane Veenman, David
Copyright Year	2015
Abstract	Using a large sample of multinational corporations (MNCs), we examine the location of earnings management within the firm. We posit and find that MNCs manage their consolidated earnings through an orchestrated reporting strategy across subsidiaries over which they exert significant influence. Specifically, we find that headquarters’ influence on subsidiary earnings management increases with the degree of subsidiary integration and the extent of earnings management opportunities, and decreases with the degree of subsidiary independence. Most importantly, we provide evidence that MNCs exploit regulatory arbitrage opportunities arising from cross-country differences in institutional quality. We document that MNCs headquartered in jurisdictions with more restrictive regulation manage earnings more through subsidiaries domiciled in countries where regulation is weaker. A difference-in-differences estimation reveals that, in response to exogenous improvements to their home countries’ reporting environment, MNCs rebalance their reporting strategies by clustering earnings management more in subsidiaries from countries with more lenient regulation. Taken together, our findings yield important insights on the drivers of earnings management location within the firm, and highlight the need for better cross-country coordination in regulatory design.
File Format	PDF HTM / HTML
Alternate Webpage(s)	https://www.wiwi.hu-berlin.de/de/professuren/bwl/finance/seminars/15s/vanstraelen_2015
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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