A1 Vertaisarvioitu alkuperäisartikkeli tieteellisessä lehdessä

Impact of country-specific business integrity and firm-specific ESG on earnings quality : evidence from EU civil law jurisdictions




TekijätLindahl Frederick; Kantola Satu-Päivi; Schadewitz Hannu

KustantajaEmerald

Julkaisuvuosi2024

JournalJournal of financial reporting & accounting

Tietokannassa oleva lehden nimiJournal of Financial Reporting and Accounting

ISSN1985-2517

eISSN2042-5856

DOIhttps://doi.org/10.1108/JFRA-02-2024-0089

Verkko-osoitehttps://doi.org/10.1108/jfra-02-2024-0089

Rinnakkaistallenteen osoitehttps://research.utu.fi/converis/portal/detail/Publication/477611782


Tiivistelmä

Purpose

This paper aims to examine whether variations in country-specific business integrity (BI) and firm-specific environmental, social and governance (ESG) dimensions can explain variations in earnings quality (EQ) in Northern and Southern EU civil law countries.

Design/methodology/approach

Regarding EQ, the analysis builds on the “small gain, small loss” (SGSL) model of Burgstahler and Dichev (1997) and Burgstahler and Chuk (2015). The authors explain SGSL with the BI. Southern Europe or “Club Med” is typically associated with a less rigorous institutional regime than Northern Europe.

Findings

Results evidenced higher EQ in the Northern EU compared with the Southern EU. Furthermore, EQ is explained successfully with the Business Integrity Index (BII) and ESG. The results suggest that BII and ESG represent different dimensions, and, therefore, both should be included in the models explaining EQ.

Practical implications

The results show that the Northern EU civil law countries have higher EQ compared with the Southern EU civil law countries. The difference is explained by the BII variable. For the Southern EU, legislators and other public policy decision-makers should build up and apply tools to limit and fight corruption in those jurisdictions. The impactful elimination of corruption would, in turn, establish a firmer basis to foster ethical behavior and financial market sophistication developments.

Originality/value

The study offers additional insights on the determinants of EQ in the EU civil law countries. The prior literature has argued that, categorically, in common law countries firms engage in higher-quality reporting than those in civil law countries. The results evidence that EQ varies within the EU civil law countries; that is, a country’s BI and firm-specific ESG contribute to the explanation for EQ. A more specific explanation for the reasons in the EQ “within” civil law jurisdictions could be related to legislators and other public policy decision-makers in charge of establishing regimes and public policies supporting high-quality accounting.


Ladattava julkaisu

This is an electronic reprint of the original article.
This reprint may differ from the original in pagination and typographic detail. Please cite the original version.




Julkaisussa olevat rahoitustiedot
This work was supported by funding from the Anja and Erkki Toivanen Foundation.


Last updated on 2025-27-01 at 19:23