Foreign earnings management of US multinational companies: The role of decision rights

Jing Huang ()
Additional contact information
Jing Huang: Virginia Tech, Pamplin College of Business

Journal of International Business Studies, 2018, vol. 49, issue 5, No 2, 552-574

Abstract: Abstract US multinational corporations (MNCs) need to allocate decision rights between parent companies and subsidiaries to manage global operations. This article examines how the allocation of decision rights affects foreign earnings management of MNCs. I find that the extent of foreign earnings management increases when parents retain centralized decision rights. But internal cross-border frictions, between parents and their foreign subsidiaries, and the external local legal environment in which foreign subsidiaries operate can mitigate foreign earnings management despite parents having centralized decision rights. This study provides evidence on how the decision structures of MNCs affect where earnings are managed.

Keywords: agency theory; multinational corporations and enterprises; international financial reporting; foreign earnings management; headquarters–subsidiary roles and relations (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://link.springer.com/10.1057/s41267-017-0143-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:49:y:2018:i:5:d:10.1057_s41267-017-0143-3

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-017-0143-3

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().