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An International Meeting of American Accounting
Association
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The Effect of Firm Specific Characteristics and the Mexican Corporate Governance Code on Earnings Quality |
Susan Mac Huga
University of Hartford
Karen Teitel
College of Holy Cross
Abstract: The Corporate Governance Code was established in Mexico in January 2000 to increase investor confidence by encouraging more accurate financial reporting by management. Machuga and Teitel (2005) find support for improved earnings quality after implementation of the Code. We investigate whether the quality of firms earnings are differentially impacted by the Code based on firm characteristics such as auditor choice, firm size and board of directors’ independence. We find that improvement in earnings quality after implementation of the Code is greater for small firms and firms with low board independence versus large firms and firms with high board independence when earnings quality is measured using abnormal accruals, and greater for firms that hire non-Big-5 versus Big-5 auditors when earnings quality is measured using earnings persistence.