Accounting Quality and the Law

35 Pages Posted: 2 Oct 2008

See all articles by Frederick W. Lindahl

Frederick W. Lindahl

George Washington University - Department of Accountancy

Hannu J. Schadewitz

Turku School of Economics at the University of Turku - Department of Accounting & Finance

Date Written: September 30, 2008

Abstract

Financial transparency is a critical factor in global financial markets. Recently, international studies of accounting quality have flourished. Guided by the conclusion in La Porta et al. (1998) that there is a fundamental difference in investor protections that that are afforded by civil vs. common law systems, accounting researchers always include the country's legal system as an explanatory variable. Usually they conclude that legal systems matter for the quality of financial disclosure.

Because this research is new and institutional details of legal systems' effect on accounting have not been studied, we evaluate the conclusion that legal family is an important determinant of quality. We review the legal scholarship about the two families, the work on the reliability of the pivotal analysis of La Porta et al. (1998), and finally the accounting research studies themselves.

We conclude that the importance of legal family on accounting quality is very weakly supported.

Keywords: Common law, civil law, international accounting, accounting quality

JEL Classification: K33, M41, M43, M47

Suggested Citation

Lindahl, Frederick W. and Schadewitz, Hannu J., Accounting Quality and the Law (September 30, 2008). Available at SSRN: https://ssrn.com/abstract=1275971 or http://dx.doi.org/10.2139/ssrn.1275971

Frederick W. Lindahl (Contact Author)

George Washington University - Department of Accountancy ( email )

School of Business and Public Management
Washington, DC 20052
United States
202-994-5639 (Phone)
202-994-5164 (Fax)

Hannu J. Schadewitz

Turku School of Economics at the University of Turku - Department of Accounting & Finance ( email )

Rehtorinpellonkatu 3
FIN-20500 Turku
Finland
+358 2 333 9321 (Phone)
+358 2 333 9350 (Fax)

HOME PAGE: http://www.utu.fi/en/people/hannu-schadewitz

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