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International Evidence on the Matching Between Revenues and Expenses
Author(s) -
He Wen,
Shan Yaowen
Publication year - 2015
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12183
Subject(s) - matching (statistics) , revenue , accrual , sample (material) , service (business) , business , accounting , internal revenue , economics , monetary economics , earnings , marketing , statistics , chemistry , mathematics , chromatography
Abstract This study investigates the time‐series trend and determinants of matching between revenues and expenses in a sample of 42 countries. We find that the decline in matching documented by Dichev and Tang ([Dichev, I., 2008]) is not unique to the United States, but is a worldwide phenomenon. Our results show that matching is weaker in countries with (i) wider use of accrual accounting; (ii) a larger proportion of firms reporting significant special items; (iii) slower economic growth; (iv) more research and development activities; (v) larger service sectors; and (vi) stronger investor protection. We find no evidence that mandatory adoption of International Financial Reporting Standards affects matching. Changes in accounting and economic factors collectively explain the downward trend in matching. Overall, the results suggest that both accounting and economic factors are important determinants of matching over time and across countries.