Earnings Management, Tax Compliance, and Institutional Factors

Posted: 13 Feb 2004

See all articles by Peter D. Wysocki

Peter D. Wysocki

Boston University Questrom School of Business


This discussion re-examines two major elements of Haw et al (2004). First, I present empirical evidence suggesting that tax compliance and earnings management are endogenous outcomes around the world. This result raises questions whether tax compliance is a causal determinant of either private control benefits or earnings management. I therefore outline a competing view, with supporting empirical evidence, that suggests that better investor protection laws and accounting standards can mitigate earnings management and, as a side benefit, increase corporate tax compliance. Second, I investigate the empirical validity of the Haw et al (2004) earnings management proxy. I find that it exhibits no association with relevant economic factors or with previously validated earnings management and accounting quality measures.

Keywords: Earnings Management, Tax, Institutional

JEL Classification: M41, M43, K42, E62, H26, K34

Suggested Citation

Wysocki, Peter D., Earnings Management, Tax Compliance, and Institutional Factors. Available at SSRN: https://ssrn.com/abstract=501962

Peter D. Wysocki (Contact Author)

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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