Journal article

Kinked accounting? Small loss avoidance in Europe and (not) the US


  • 2024
English For a long time, the most vivid evidence of earnings management has been a discontinuity of earnings distributions at the threshold of profits and losses, indicating loss-avoidance behavior. In the US, this discontinuity disappeared around the time the Sarbanes-Oxley Act was implemented, suggesting that the reform had successfully pushed back earnings management. In 2006, the EU established its own set of rules for audits, public oversight of audits and investor protection in Directive 2006/43/EC, sometimes referred to as ``European SOX''. We analyze whether the zero earnings discontinuity in Europe has disappeared after the introduction of European SOX and find that this is not the case: In contrast to the US, the discontinuity has remained stable in Europe, and it remains more pronounced in code law countries and in cultures of high uncertainty avoidance.
Faculté des sciences économiques et sociales et du management
Département des sciences du Management
  • English
License undefined
Open access status
Persistent URL

Document views: 1 File downloads:
  • aie_2024_kinkedaccountingsmalllossavoidanceineuropeandnottheus.pdf: 0