Macroeconomic Environment and Persistence of Accounting Information of Companies Listed on International Stock Exchanges

Abstract

This study aims to examine the relationship between macroeconomic measures and the persistence of accounting information in companies listed on international stock exchanges. To achieve this, a sample of 37,852 companies was compiled, including data from publicly traded companies across 42 countries during the period from 2008 to 2021, resulting in a total of 432,290 observations. For measuring the persistence of earnings, cash flow, and accruals, the models proposed by Sloan (1996), Dechow and Schrand (2004), and Dechow et al. (2010) were utilized. To represent the macroeconomic environment, the following measures were used: inflation, GDP, interest rate, exchange rate, unemployment rate, and public debt. Data for these measures were collected from The World Bank platform. The study’s findings revealed that the persistence of accounting information is negatively related to inflation, exchange rate, and unemployment rate, while it is positively related to public debt and GDP, and is not impacted by the interest rate. Therefore, it is highlighted that accounting information of companies can be influenced by the macroeconomic environment in which they operate. In other words, the economic scenario of a country significantly affects the quality of information reported by its companies. These findings contribute to the existing literature and enhance our understanding of how the quality of accounting information behaves across various macroeconomic scenarios from the perspective of persistence, a measure considered valuable for users of accounting information, representing the volatility of accounting numbers over time.