Abstract

http://ssrn.com/abstract=1909278
 
 

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The Impact of Religion on Financial Reporting Irregularities


Sean T. McGuire


Texas A&M University - Department of Accounting

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Nathan Y. Sharp


Texas A&M University - Department of Accounting

August 2011

Accounting Review, Forthcoming

Abstract:     
This study examines the impact of religion on financial reporting. We predict that firms in religious areas are less likely to engage in financial reporting irregularities because prior research links religiosity to reduced acceptance of unethical business practices. Our results suggest that firms headquartered in areas with strong religious social norms generally experience lower incidences of financial reporting irregularities. We also examine whether religiosity influences managers’ methods of managing earnings. Although we find a negative association between religiosity and abnormal accruals, we find a positive association between religiosity and two measures of real earnings management, suggesting that managers in religious areas prefer real earnings management over accruals manipulation. We provide evidence that our results are not driven by firms headquartered in rural areas and conclude that religious social norms represent a mechanism for reducing costly agency conflicts, particularly when other external monitoring is low.

Keywords: religion, financial reporting irregularities, earnings management, monitoring, religious social norms

JEL Classification: M41, Z12, M14, D21

Accepted Paper Series





Not Available For Download

Date posted: August 15, 2011  

Suggested Citation

McGuire, Sean T. and Omer, Thomas C. and Sharp, Nathan Y., The Impact of Religion on Financial Reporting Irregularities (August 2011). Accounting Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1909278

Contact Information

Sean T. McGuire
Texas A&M University - Department of Accounting ( email )
430 Wehner
College Station, TX 77843-4353
United States
Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Nathan Y. Sharp (Contact Author)
Texas A&M University (TAMU) - Department of Accounting ( email )
430 Wehner
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

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