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The Effects of the Mexican Corporate Governance Code on Quality of Earnings and its Components

Author

Listed:
  • Susan Machuga

    (Department of Accounting, University of Hartford)

  • Karen Teitel

    (Department of Economics, College of the Holy Cross)

Abstract

The Corporate Governance Code (Code) was established in Mexico in January 2000 to increase investor confidence by encouraging more accurate financial reporting and more transparent disclosure practices by management. Using a sample of Mexican firms, we investigate whether or not there is an improvement in earnings quality surrounding the implementation date of the Code. We use a variety of earnings quality characteristics frequently studied in prior international research. Our results indicate that the quality of earnings increases after the implementation of the Code. While earnings quality characteristics generally improve for firms listed exclusively on the Mexican Bolsa, we only document improvements in income smoothing and timely loss recognition for Mexican firms listed on U.S. stock exchanges. Our results suggest that the filing jurisdiction of Mexican firms influences the impact we observe in changes in quality of earnings surrounding the implementation of the Mexican Corporate Governance Code.

Suggested Citation

  • Susan Machuga & Karen Teitel, 2007. "The Effects of the Mexican Corporate Governance Code on Quality of Earnings and its Components," Working Papers 0708, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:0708
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    File URL: http://aaajournals.org/doi/10.2308/jiar.2007.6.1.37
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    Citations

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    Cited by:

    1. Ajina, Aymen & Laouiti, Mhamed & Msolli, Badreddine, 2016. "Guiding through the Fog: Does annual report readability reveal earnings management?," Research in International Business and Finance, Elsevier, vol. 38(C), pages 509-516.
    2. Elisa Baraibar-Diez & María D Odriozola & José Luis Fernández Sánchez, 2016. "Transparency through European corporate governance codes," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 13(3), pages 244-261, August.
    3. Turner, Elizabeth H. & Pacheco-Paredes, Arturo & Wheatley, Clark, 2024. "Transfer of knowledge: Do trade surpluses foster quality in accounting practices?," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 436-451.
    4. Miranda-Lopez, Jose E. & Nichols, Linda M., 2012. "The use of earnings and cash flows in investment decisions in the U.S. and Mexico: Experimental evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(2), pages 198-208.
    5. Eiler, Lisa A. & Miranda-Lopez, Jose & Tama-Sweet, Isho, 2015. "The Impact of Accounting Disclosures and the Regulatory Environment on the Information Content of Earnings Announcements," The International Journal of Accounting, Elsevier, vol. 50(2), pages 142-169.
    6. Jesus Sáenz González & Emma García-Meca, 2014. "Does Corporate Governance Influence Earnings Management in Latin American Markets?," Journal of Business Ethics, Springer, vol. 121(3), pages 419-440, May.
    7. Boachie, Christopher & Mensah, Emmanuel, 2022. "The effect of earnings management on firm performance: The moderating role of corporate governance quality," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Emmanuel Mensah & Peter Ackah & Mamdouh Abdulaziz Saleh Al-Faryan, 2024. "Firms growth opportunities and accruals earnings management nexus: does corporate and national governance systems play a role?," SN Business & Economics, Springer, vol. 4(10), pages 1-41, October.
    9. Machuga, Susan & Teitel, Karen, 2009. "Board of director characteristics and earnings quality surrounding implementation of a corporate governance code in Mexico," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 18(1), pages 1-13.

    More about this item

    Keywords

    Accounting; Earnings;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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