IS MANAGERIAL DISCRETION HIGHER IN MULTINATIONAL FIRMS?

Abstract

The objective of this study is to investigate whether a firm’s multi nationality is associated with managerial discretion by examining accounting choices of multinational firms, surrounding Sarbanes-Oxley Act(SOX). By employing a firm-specific abnormal accrual estimation design to measure accounting flexibility or discretion, the results show that multinational firms, compared with their industry-size-matched counterparts, tend to have greater managerial discretion in accounting choices before SOX. Other results also show that after SOX the deceased discretion in accounting choices is more pronounced in multinational firms then control uninational firms