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The Impact of Elections on the Quality of Financial Statements in Municipally Owned Entities

Author

Listed:
  • Capalbo, Francesco
  • Galati, Luca
  • Lupi, Claudio
  • Smarra, Margherita

Abstract

Misleading financial reports are generally considered damaging events for corporations and society at large. Drawing on Cooper, Dacin and Palmer (2013), this paper complements existing research with an example in which context, intended as distribution of power, concurred to explain accounting data manipulation. By applying Benford's Law to look for signs of manipulated financial statements published by Italian Municipally Owned Entities operating in utility industries, this study reveals red flags of financial misstatements concentrated during election periods. This implies that internal/external auditors need to pay more attention to the quality of accounting data in these crucial periods and specific environments.

Suggested Citation

  • Capalbo, Francesco & Galati, Luca & Lupi, Claudio & Smarra, Margherita, 2022. "The Impact of Elections on the Quality of Financial Statements in Municipally Owned Entities," Economics & Statistics Discussion Papers esdp22078, University of Molise, Department of Economics.
    • Handle: RePEc:mol:ecsdps:esdp22078
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    References listed on IDEAS

    as
    1. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    2. Geoffrey M. Hodgson, 1998. "The Approach of Institutional Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 166-192, March.
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    More about this item

    Keywords

    Quality of financial statements; elections; public sector accounting; power; Benford's Law;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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