A Multivariate Study on Earnings Management

This study extends the work of Leuz et al. (2003) through using multivariate statistical analyses. I examine the differences in earnings management based on the notion of investor protection across 26 countries. Consistent with the prediction that earnings management is expected to be lower in countries with strong investor protection, the findings show that significant differences in investor protection reflected by country-level institutional characteristics exist among legal origin and legal tradition groups, and the differences in earnings management across countries are significantly associated with the differences in these institutions