The effect of antitrust investigations on discretionary accruals: a refined test of the political-cost hypothesis
Article Abstract:
The accounting procedures of firms being investigated for possible violations of antitrust laws are examined. Using a sample of 48 firms that underwent monopoly-related investigations, it is shown that firms under investigation respond to these antitrust investigations by adopting accounting procedures that reduce reported income. The adjustment of reported earnings by the firms that were investigated was revealed through regression analysis of their discretionary accruals using a fixed effects covariance model.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
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Legal recourse and the demand for auditing
Article Abstract:
The demand for auditing services in 32 experimental markets was examined to determine how the presence of legal recourse affects the operation of these markets. The results indicate that the availability of legal recourse, which allows investors to sue publicly traded firms that issue fraudulent financial statements, leads to improved economic efficiency in experimental markets. The efficiency gains in markets that permit legal recourse are the result of better allocation of resources and greater seller effort.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
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