Do International Differences in Certain Cultural Dimensions Lower Cross-Country Accounting Comparability Under IFRS? - An Examination of Risk Aversion and Materialism

54 Pages Posted: 18 Dec 2018 Last revised: 22 Jan 2024

See all articles by Byung Hun Chung

Byung Hun Chung

Nanyang Business School, Nanyang Technological University

Date Written: October 4, 2018

Abstract

I examine whether differences in cultural dimensions of risk aversion and materialism lower accounting comparability between countries that require IFRS. I posit that certain cultural beliefs and values affect the estimates and judgements of those involved in financial reporting, resulting in inconsistent reporting decisions and lower cross-country comparability. I find that having greater differences in risk aversion and materialism lowers comparability. In cross-sectional tests, I find weak evidence that stronger enforcement of IFRS moderates the decrease in the cross-country comparability. Having stronger legal or regulatory systems does not moderate the decrease in the comparability due to differences in risk aversion and materialism. These findings suggest that having strong enforcement regimes does not effectively moderate the impact of cultural differences on cross-country comparability. A possible explanation is that those in charge of the enforcement are affected by the same cultural beliefs and values as the reporting parties, making moderation less likely.

Keywords: IFRS, Comparability, National Culture

JEL Classification: M40

Suggested Citation

Chung, Byung Hun, Do International Differences in Certain Cultural Dimensions Lower Cross-Country Accounting Comparability Under IFRS? - An Examination of Risk Aversion and Materialism (October 4, 2018). Available at SSRN: https://ssrn.com/abstract=3284817 or http://dx.doi.org/10.2139/ssrn.3284817

Byung Hun Chung (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4979 (Phone)

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