Professional Accountancy Organizations and Stock Market Development

Hong Huang (), Xiangting Kong () and Albert Tsang ()
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Hong Huang: The Chinese University of Hong Kong
Xiangting Kong: Sun Yat-Sen University
Albert Tsang: York University

Journal of Business Ethics, 2019, vol. 157, issue 1, No 14, 260 pages

Abstract: Abstract This study investigates the relationship between the ethical, educational, and disciplinary development of professional accountancy organizations (PAOs) in a given country and the development of that country’s stock market. Using a comprehensive measure based on the responses of the major PAOs in 36 countries to a questionnaire designed by the International Federation of Accountants to assess the development of PAOs internationally, we find a significantly positive association between the development of PAOs and stock market development. In addition, we find the positive association between the development of PAOs and stock market development to be more pronounced in countries with higher levels of investor protection, a stronger public enforcement environment, or lower levels of corruption, suggesting the importance of complementary institutions in the relationship between PAOs and stock market development. We also find that better-developed PAOs are associated with better-quality financial reporting. Finally, our result also shows that relative to the investigation and discipline mechanism and educational requirements imposed by PAOs, the ethical development of a country’s professional accountants appears to have the strongest positive association with a country’s stock market development.

Keywords: Ethics; Education; Oversight; Financial reporting quality; Economic development (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10551-017-3665-5

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