An Examination of the Agency Theory Problem of Earnings Management: Is it an Anglo-Saxon Cultural Phenomenon?

International Journal of Critical Accounting, 7(5/6): 487-511, 2015

39 Pages Posted: 24 Jul 2016

See all articles by Ramon Rodriguez

Ramon Rodriguez

Idaho State University

Stephen B. Salter

Department of Accounting Middle Tennessee University

Murphy Smith

Texas A&M University-Corpus Christi-Department of Accounting

Date Written: 2015

Abstract

The arrangement in which a manager, that is, an agent, works for the benefit of a property owner has been around since the beginning of human history. An early example is found in the parable of the “shrewd manager,” told by Jesus of Nazareth. This study presents empirical evidence that will be used to determine whether Agency Theory is primarily applicable in Anglo-Saxon countries. Two competing perspectives are evaluated: (1) national cultural variable individualism/collectivism influences agency problems versus (2) agency problems are a unique Anglo-Saxon problem. Using a sample of firms from thirty counties over a five year window, controlling for location in Anglo-Saxon countries, the national cultural variable is insignificant. Thus, the analysis indicates that the agency problem of earnings management appears to be a unique Anglo-Saxon problem rather than a function of the individualism/collectivism dimension of national culture.

Keywords: Agency Theory, Anglo-American, Anglo-Saxon, Collectivism, Culture, Earnings Management, Individualism, International Accounting

JEL Classification: M4, M41

Suggested Citation

Rodriguez, Ramon and Salter, Stephen Brian and Smith, Murphy, An Examination of the Agency Theory Problem of Earnings Management: Is it an Anglo-Saxon Cultural Phenomenon? (2015). International Journal of Critical Accounting, 7(5/6): 487-511, 2015. Available at SSRN: https://ssrn.com/abstract=2812931

Ramon Rodriguez

Idaho State University ( email )

921 South 8th Avenue
Pocatello, ID 83209
United States

Stephen Brian Salter

Department of Accounting Middle Tennessee University ( email )

Box 50 Business and Aerospace N425
1301 East Main
Murfreesboro, TN 37132
United States
(615) 898-2345 (Phone)
(615) 898-5839 (Fax)

HOME PAGE: http://www.mtsu.edu/accounting/faculty.php

Murphy Smith (Contact Author)

Texas A&M University-Corpus Christi-Department of Accounting ( email )

6300 Ocean Dr
Corpus Christi, TX 78412
United States

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