Legal Regime and Financial Reporting Quality

47 Pages Posted: 10 Apr 2014

See all articles by Andrei Filip

Andrei Filip

ESSEC Business School

Réal Labelle

HEC Montréal - Stephen A. Jarislowsky Chair in Governance

Stephane Rousseau

Université de Montréal - Faculty of Law

Date Written: April 9, 2014

Abstract

This article uses the Canadian environment, where French civil law in the province of Quebec coexists with common law in the rest of Canada (denoted as bijural), to test the thesis of the neutrality of the legal system with regard to financial reporting quality. This single-country design allows for a better control over other factors that influence financial reporting quality. The French civil law environment appears to encourage firms to publish accounting data of better quality due to the greater liability risk faced by auditors and corporate directors under that regime. These findings, based on ten years of data and seven attributes of financial reporting quality, are robust to different matching procedures and model specifications. This research contributes to the current debates in Canada as to whether financial market regulation under French civil law and common law jurisdictions should be unified under a single common law national securities regulator. At the broader level, the results support claims that a more in-depth understanding of the implementation of civil law and common law is needed rather than gross generalization about the two systems. These results especially call into question that common law regimes are unambiguously superior to civil law regimes in encouraging high quality financial reports.

Keywords: Investor protection; bijuralism; bijural; French civil law; common law; legal regime; legal origin; financial reporting quality.

JEL Classification: G38, K12, M4

Suggested Citation

Filip, Andrei and Labelle, Réal and Rousseau, Stephane, Legal Regime and Financial Reporting Quality (April 9, 2014). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2422803

Andrei Filip

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France
+33 1 34 43 33 61 (Phone)

Réal Labelle (Contact Author)

HEC Montréal - Stephen A. Jarislowsky Chair in Governance ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514 340 6374 (Phone)

Stephane Rousseau

Université de Montréal - Faculty of Law ( email )

C.P. 6128 succ. centre-ville
Montreal, Quebec H3C 3J7
Canada

HOME PAGE: http://www.droitdesaffaires.ca

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
139
Abstract Views
1,423
rank
234,051
PlumX Metrics