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
Date Written: 2015
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: Suggested Citation