Refereed journal article or data article (A1)
Are legal families related to financial reporting quality?
List of Authors: Lindahl Frederick, Schadewitz Hannu
Publisher: Wiley
Publication year: 2013
Journal: Abacus
Article number: 5
Volume number: 49
Issue number: 2
Start page: 242
End page: 267
Number of pages: 26
ISSN: 0001-3072
eISSN: 1467-6281
DOI: http://dx.doi.org/10.1111/abac.12008
Self-archived copy’s web address: https://research.utu.fi/converis/portal/detail/Publication/3862440
A large body of financial accounting research explores the quality of accounting in different countries. An important assumption in most of that research is that common law provides a firmer foundation for good accounting transparency than civil law. Researchers usually regress their proxy for accounting quality on an indicator variable that designates the firm's country as a common or civil law jurisdiction (along with other regressors). But what is the support for that nearly universal assumption? This study addresses that question. It traces the distinctions made by legal scholars that characterize the two ‘families’. It analyzes La Porta et al. (1998), which is the nearly universal citation to support the civil/common dummy, and assesses the design and development of research designs that use law in accounting studies. It concludes that the use of the civil/common distinction as applied in accounting studies cannot be supported, and offers suggestions for how to better investigate the ways in which the law interacts with financial reporting.
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