Examining the Relationship Between National Culture and Earnings Management

Authors

  • Catherine Whelan The University of Notre Dame Australia
  • Sarah Ann Humphries Georgia College & State University

DOI:

https://doi.org/10.33423/jabe.v24i6.5716

Keywords:

business, economics, earnings management, national culture, Hofstede cultural dimensions

Abstract

This study investigates the relationship between national culture and the incidence of earnings management across thirty-one nations while controlling for the strength of corporate governance and type of legal system. The results indicate the importance of national culture in explaining the difference in the incidence of earnings management across nations. Earnings management is found to be higher in countries with low scores on the Individualism dimension and high scores on the Uncertainty Avoidance and Long-Term Orientation dimensions. This study confirms the relationship between national culture and earnings management and contributes to the literature through the inclusion of the Long-term Orientation and Indulgence dimensions of national culture. The potential impact of national culture on earnings quality highlights the need for caution in assuming that the harmonization of accounting standards alone will lead to comparability and consistency of financial reporting.

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Published

2022-12-31

How to Cite

Whelan, C., & Humphries, S. A. (2022). Examining the Relationship Between National Culture and Earnings Management. Journal of Applied Business and Economics, 24(6). https://doi.org/10.33423/jabe.v24i6.5716

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Section

Articles