Although we predict that firms applying IAS have less earnings management and, thus, higher earnings variability, some studies (e.g., Healy [ 1985]) suggest that, in the case of “big baths,” managers may use discretion in ways that result in higher earnings variability. Thus, firms applying domestic standards could have more discretion for this form of earnings management and thus could exhibit higher earnings variability. Also, higher earnings variability could be indicative of lower earnings quality because of error in estimating accruals. Thus, higher quality accounting can resuit in lower earnings variability.