Muhammad Nurul Houqe

IFRS Adoption, Extent of Disclosure, and Perceived Corruption: A Cross-Country Study

Using data from 166 countries over the period 1996-2011, we investigate the role of accounting information in reducing corruption after controlling for the effects of political institutions and economic development. We find strong evidence that accounting environment plays only a minor role relative to the strength of political institutions in the control of corruption. Our results hold even after controlling for variables related to investor protection and cultural dimensions. Our results challenge the view that countries intending to reduce corruption should invest in higher-quality accounting standards. Our findings also suggest that countries with the strongest political institutions stand to benefit most from IFRS adoption.Using data from 166 countries over the period 1996-2011, we investigate the role of accounting information in reducing corruption after controlling for the effects of political institutions and economic development. We find strong evidence that accounting environment plays only a minor role relative to the strength of political institutions in the control of corruption. Our results hold even after controlling for variables related to investor protection and cultural dimensions. Our results challenge the view that countries intending to reduce corruption should invest in higher-quality accounting standards. Our findings also suggest that countries with the strongest political institutions stand to benefit most from IFRS adoption.

Audit Quality, Earnings Management, and Cost of Equity Capital: Evidence from India

This study examines the effect of audit quality on earnings management and cost of equity capital of listed companies in India. Our results show that companies employing a high-quality auditor have a lower degree of earnings management and lower cost of equity capital. The results also show that companies belonging to business groups have a lower degree of earnings management and lower cost of equity capital than do stand-alone companies but that they benefit less from employing a high-quality auditor. Our results are based on a large sample of 7,303 firm-year observations on listed companies in India and are robust to alternative measures for our main variables – audit quality, earnings management, and cost of capital – and to tests for endogeneity and the impact of the global financial crisis (GFC). Given the distinctive and unique institutional features of the Indian market such as the dominant role of family business groups in the national economy, large market share of domestic audit firms, less litigious environment, and less effective professional accounting bodies in checking audit failure, our findings make a significant contribution to the literature on the role of audit quality as a corporate governance monitoring mechanism as reflected in the impact on earnings management and cost of equity capital.

Secrecy and the impact of mandatory IFRS adoption on earnings quality in Europe

This study examines the effect of mandatory IFRS adoption on earnings quality in countries which exhibit high financial secrecy. Earnings quality is proxied by signed abnormal accruals and earnings conservatism. Using 19,324 firm-years from 14 countries over the period 19982011, we find that firms in a high-secrecy country tend to report higher abnormal accruals and earnings conservatism, which results in lower earnings quality. On the other hand, we find that mandatory IFRS adoption improves earnings quality by decreasing abnormal accruals and earnings conservatism. Our study provides evidence of the interaction between national culture, as indicated by secrecy, and IFRS adoption and helps to explain differences in earnings quality across different jurisdictions following IFRS adoption.