Main Article Content
Big Four Auditors, Real Earnings Management, Accruals Earnings Management, Pakistan
Purpose of Study: The purpose of this paper is to investigate whether firms audited by big four auditors have better financial reporting quality as compared to firms audited by non-big four auditors in Pakistan.
Methodology: This study examine whether firms are more engaged in real earnings’ management when their ability to manage accruals is constrained by big four auditors. In current study, we find that big four auditors’ have curtailed accrual- based earnings management activities in firms.
Results: However, firms audited by big four auditors are more engaged in costly real earnings’ management activities. The study used a sample of non-financial listed firms in Pakistan over the period of 2009–2016. This study contributes to the field of corporate governance, where it provides deep insight to policy-makers who are interested in improving financial reporting quality in transnational economies.
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