A Cross-Country Study on the Effects of National Culture on Earnings Management
Journal of International Business Studies, Vol. 41, No. 1, 2010
37 Pages Posted: 4 Feb 2011
Date Written: January 1, 2010
This study hypothesizes and tests whether the degrees to which managers exercise earnings discretion relates to their value system (i.e., culture) as well as the institutional features (i.e., legal environment) of their country. We find that uncertainty avoidance and individualism dimensions of national culture explain managers’ earnings discretion across countries and that this association varies with the strength of investor protection. This study extends prior literature by documenting that both national culture and institutional structure are important factors that explain corporate managers’ earnings discretion practices around the world and that the influences of these factors on earnings discretion are conditional on each other.
Keywords: Cross-Cultural Management, Cultural Frameworks, International Financial Reporting, Earnings Management, National Culture, Investor Protection, Disclosure
JEL Classification: F23, G15, M41
Suggested Citation: Suggested Citation