Do Culture and Religion Mitigate Earnings Management? Evidence from a Cross-Country Analysis

International Journal of Disclosure and Governance, Forthcoming

Posted: 7 Nov 2010

See all articles by Jeffrey L. Callen

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Mindy Morel

University of Toronto - Joseph L. Rotman School of Management

Grant Richardson

Department of Accounting and Corporate Governance

Date Written: November 6, 2010

Abstract

This study investigates whether culture in general and religion in particular mitigate earnings management. Using a cross-country data set, empirical tests based on rank regressions indicate that earnings management is unrelated to both religious affiliation and the degree of religiosity. In contrast, earnings management is found to be negatively related to the updated Hofstede (1980) cultural variable of individualism and positively related to uncertainty avoidance. Our results also indicate that the positive impact of the legal environment in mitigating earnings management, documented by Leuz et al. (2003), can no longer be demonstrated after controlling for culture.

Keywords: Earnings Management, Culture, Religion, Legal Environment

JEL Classification: A13, F23, G39, K49, M41, O57

Suggested Citation

Callen, Jeffrey L. and Morel, Mindy and Richardson, Grant, Do Culture and Religion Mitigate Earnings Management? Evidence from a Cross-Country Analysis (November 6, 2010). International Journal of Disclosure and Governance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1704163

Jeffrey L. Callen (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

Mindy Morel

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-971-3048 (Phone)

Grant Richardson

Department of Accounting and Corporate Governance ( email )

4 Eastern Road
North Ryde
New South Wales, NSW 2109
Australia

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