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A cross-country study on the effects of national culture on earnings management

Author

Listed:
  • Sam Han

    (Singapore Management University, Singapore, Singapore)

  • Tony Kang

    (Florida Atlantic University, Davie, USA)

  • Stephen Salter

    (University of Texas at El Paso, El Paso, USA)

  • Yong Keun Yoo

    (Korea University, Seoul, Korea)

Abstract

This study hypothesizes and tests whether the degree to which managers exercise earnings discretion relates to their value system (i.e., culture) as well as the institutional features (i.e., legal environment) of their country. We find that uncertainty avoidance and individualism dimensions of national culture explain managers' earnings discretion across countries, and that this association varies with the strength of investor protection. This study extends prior literature by documenting that both national culture and institutional structure are important factors that explain corporate managers' earnings discretion practices around the world, and that the influences of these factors on earnings discretion are conditional on each other.

Suggested Citation

  • Sam Han & Tony Kang & Stephen Salter & Yong Keun Yoo, 2010. "A cross-country study on the effects of national culture on earnings management," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(1), pages 123-141, January.
    • Handle: RePEc:pal:jintbs:v:41:y:2010:i:1:p:123-141
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