The effect of enforcement on timely loss recognition: Evidence from insider trading laws

Sudarshan Jayaraman

Journal of Accounting and Economics, 2012, vol. 53, issue 1, 77-97

Abstract: I use the first-time enforcement of insider trading laws in sixteen countries as a shock to enforcement and examine its influence on timely loss recognition (TLR). Consistent with greater enforcement increasing the usefulness of accounting information in contracts and thereby the demand for higher quality reporting, insider trading enforcement is associated with a significant increase in TLR. No such increase is detected in neighboring non-enforcing countries. In addition to documenting how shocks to enforcement influence financial reporting outcomes, this is also the first study to extend the Khan and Watts (2009) measure of accounting conservatism to a cross-country setting.

Keywords: Timely loss recognition; Conservatism; Insider trading; Enforcement; Financial reporting (search for similar items in EconPapers)
JEL-codes: G15 K42 M41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:53:y:2012:i:1:p:77-97

DOI: 10.1016/j.jacceco.2011.10.003

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