Financial Reporting Differences Around the World: What Matters?

70 Pages Posted: 4 Jun 2016 Last revised: 14 Jul 2016

See all articles by Helena Isidro

Helena Isidro

ISCTE-IUL Instituto Universitário de Lisboa

Dhananjay Nanda

University of Miami - Department of Accounting

Peter D. Wysocki

Boston University Questrom School of Business

Date Written: June 2, 2016

Abstract

The international financial reporting literature identifies a multitude of country attributes that each appear to explain financial reporting differences around the world. We first show that a single underlying factor explains across-country variation in 6 reporting quality measures used in the international literature. We then examine 72 country attributes and show that they are highly correlated and that 4 underlying factors explain most of the variation in these attributes across countries. Furthermore, individual country attributes provide essentially no incremental explanatory power for international reporting diversity over these 4 factors, which collectively explain over 70% of the variation in reporting differences. Our findings highlight the very high causal density of country attributes and thus the difficulty in attributing international reporting diversity to specific institutions and policies. We conclude with a discussion of possible future directions for research on financial reporting around the world.

Keywords: IFRS, International accounting, Complementarities, Correlation, Factor analysis, Financial reporting, Accounting quality, Multiple Testing

Suggested Citation

Isidro, Helena and Nanda, Dhananjay and Wysocki, Peter D., Financial Reporting Differences Around the World: What Matters? (June 2, 2016). Available at SSRN: https://ssrn.com/abstract=2788741 or http://dx.doi.org/10.2139/ssrn.2788741

Helena Isidro

ISCTE-IUL Instituto Universitário de Lisboa ( email )

Avenida Forcas Armadas
Lisboa, 1649-026
Portugal

Dhananjay Nanda (Contact Author)

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

Peter D. Wysocki

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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