 Do financing constraints affect the financial integrity of firms?Charilaos Mertzanis, Hazem Marashdeh and Asma Houcine International Review of Economics & Finance, 2024, vol. 90, issue C, 220-240 Abstract: We use micro-survey data from 126,309 private non-financial firms in 138 developing nations during the period of 2006–2018 to investigate how financing constraints affect the integrity of their financial information. Our findings indicate that private firms with greater financing constraints are less inclined to undergo external audits voluntarily. This effect varies depending on factors such as firm size, business sector, ownership structure, accounting and auditing conditions, as well as the prevailing institutional environment. Our results remain robust even after subjecting them to various sensitivity and endogeneity tests. They suggest that financially constrained firms in developing countries may have stronger motivations to manipulate earnings, employ aggressive tax avoidance strategies, or be susceptible to managerial short-sightedness. Additionally, it is possible that finance providers rely on alternative mechanisms rather than audited accounts to monitor firm performance. Keywords: Financial integrity; Financing constraints; Institutions; Developing countries (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:90:y:2024:i:c:p:220-240 DOI: 10.1016/j.iref.2023.12.004 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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