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Culture's consequence: The relationship between income-increasing earnings management and IAS/IFRS adoption across cultures

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  • Ugrin, Joseph C.
  • Mason, Terry W.
  • Emley, Anna

Abstract

Research has shown that earnings management has increased amongst firms in Europe post-IFRS adoption, but the association between IFRS adoption and earnings management is not uniform across countries. We propose the culture of a firm's country of origin relates significantly with changes in earnings management pre- and post-IFRS adoption. We test our proposition using the Hofstede Model of Cultural Dimensions and find a significant increase in income-increasing earnings management after IFRS adoption amongst firms based in countries that are more power distant, uncertainty avoidant, individualistic, short-term oriented, and indulgent.

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  • Ugrin, Joseph C. & Mason, Terry W. & Emley, Anna, 2017. "Culture's consequence: The relationship between income-increasing earnings management and IAS/IFRS adoption across cultures," Advances in accounting, Elsevier, vol. 37(C), pages 140-151.
    • Handle: RePEc:eee:advacc:v:37:y:2017:i:c:p:140-151
    DOI: 10.1016/j.adiac.2017.04.004
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