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International Evidence on the Matching Between Revenues and Expenses

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  • Wen He
  • Yaowen Shan

Abstract

This study investigates the time†series trend and determinants of matching between revenues and expenses in a sample of 42 countries. We find that the decline in matching documented by Dichev and Tang () is not unique to the United States, but is a worldwide phenomenon. Our results show that matching is weaker in countries with (i) wider use of accrual accounting; (ii) a larger proportion of firms reporting significant special items; (iii) slower economic growth; (iv) more research and development activities; (v) larger service sectors; and (vi) stronger investor protection. We find no evidence that mandatory adoption of International Financial Reporting Standards affects matching. Changes in accounting and economic factors collectively explain the downward trend in matching. Overall, the results suggest that both accounting and economic factors are important determinants of matching over time and across countries.

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  • Wen He & Yaowen Shan, 2016. "International Evidence on the Matching Between Revenues and Expenses," Contemporary Accounting Research, John Wiley & Sons, vol. 33(3), pages 1267-1297, September.
    • Handle: RePEc:wly:coacre:v:33:y:2016:i:3:p:1267-1297
    DOI: 10.1111/1911-3846.12183
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    Cited by:

    1. Deli Wang & Ke Peng & Kaiye Tang & Yewei Wu, 2022. "Does Fintech Development Enhance Corporate ESG Performance? Evidence from an Emerging Market," Sustainability, MDPI, vol. 14(24), pages 1-21, December.
    2. Kim, Robert & Kim, Sangwan, 2021. "Does revenue-expense matching play a differential role in analysts’ earnings and revenue forecasts?," The British Accounting Review, Elsevier, vol. 53(5).

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