The Price of Control: Pandemic Lockdowns and Perceived Earnings Quality

ABSTRACT In this study, we investigate whether investors perceived earnings quality to be impaired by lockdown policies implemented to control the spread of COVID‐19. Using a sample of American Depositary Receipts (ADR) firms, we find that investors perceived earnings quality to be adversely impacted as the lockdown period lengthened. This effect is more pronounced in countries with a history of scandals and among younger companies. Our findings provide valuable insights for stakeholders focused on assessing the impact of COVID‐19 on earnings quality.