One-Book Versus Two-Book System : Learnings from Europe

Despite ongoing debates about the effect of book-tax conformity on earnings management in consolidated statements, there is a paucity of evidence from Europe, where both one- and two-book systems occur. In this study, we examine the influence of one- and two-book systems on earnings management using the consolidated statements of 18,578 European firm-years from 2004 to 2009. We find that firms in a one-book system show significantly more earnings management in consolidated statements compared with those in a two-book system