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Gambling culture and earnings management: A novel perspective

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  • Alharbi, Samar S.
  • Atawnah, Nader
  • Ali, Muhammad Jahangir
  • Eshraghi, Arman

Abstract

Do gambling preferences affect earnings management in a corporate context? We examine this potential link and find a positive and significant association between local gambling culture, as proxied by faith and firm-level earnings management. The results are robust to potential endogeneity tested through relocation of corporate headquarters and change regressions. We also show that the impact of local gambling preferences on earnings management is stronger when firms are more risk-taking as proxied by higher earnings volatility. Further, this positive association between gambling preferences and earnings management is mitigated by closer monitoring through institutional investors and takeover threats.

Suggested Citation

  • Alharbi, Samar S. & Atawnah, Nader & Ali, Muhammad Jahangir & Eshraghi, Arman, 2023. "Gambling culture and earnings management: A novel perspective," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 520-539.
    • Handle: RePEc:eee:reveco:v:86:y:2023:i:c:p:520-539
    DOI: 10.1016/j.iref.2023.03.039
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    More about this item

    Keywords

    Gambling; Earnings management; Earnings volatility; Ownership; Takeovers;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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