5. Conclusions
In this paper we analysed the impact of firm- and country-level determinants on the managerial discretionary behaviour for a sample of companies from Argentina, Brazil, Chile, Colombia, Mexico, and Peru. To the best of our knowledge, this is perhaps the first work in studying the relationship between this set of variables on the earnings management for a sample of representative firms from Latin American countries.
The varying efficiency of controlling mechanisms in the region is reflected in the way in which accounting discretion is performed. An example of this is the dividend policy, which states that to meet the demand for dividends by shareholders, managers are motivated to manipulate accounting information to meet the required dividends. Similarly, ownership structure is a doubleedged sword as a controlling system in the region. We observe that the insider ownership might constrain earnings management up to a certain extent, but it also may stimulate opportunistic behaviour of managers to manipulate financial reporting. The impact of these two determinants on earnings management highlights the need for further improvements of efficient monitoring mechanisms at the firm level.
