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Languages and earnings management

Author

Listed:
  • Kim, Jaehyeon
  • Kim, Yongtae
  • Zhou, Jian

Abstract

We predict that managers of firms in countries where languages do not require speakers to grammatically mark future events perceive future consequences of earnings management to be more imminent, and therefore they are less likely to engage in earnings management. Using data from 38 countries, we find that accrual-based earnings management and real earnings management are less prevalent where there is weaker time disassociation in the language. Our study is the first to examine the relation between the grammatical structure of languages and financial reporting characteristics, and it extends the literature on the effect of informal institutions on corporate actions.

Suggested Citation

  • Kim, Jaehyeon & Kim, Yongtae & Zhou, Jian, 2017. "Languages and earnings management," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 288-306.
    • Handle: RePEc:eee:jaecon:v:63:y:2017:i:2:p:288-306
    DOI: 10.1016/j.jacceco.2017.04.001
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    More about this item

    Keywords

    Institutions; Languages; Earnings management; Accrual-based earnings management; Real earnings management;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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