Employing both measures can provide collaborating evidence, since enhanced
regulations may provide fewer incentives for managers to manage earnings, and thus
the magnitude of abnormal accruals may be lower; on the other hand, highly
significant legislative changes to financial practice and corporate governance may
encourage firms to undertake less optimal yet safer investment opportunities.
Therefore, financial information may become a less clear representation of the
economic resources and changes in economic resources of the firm. Accordingly, all
else being equal, earnings informativeness may be reduced