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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.

Suggested Citation

  • 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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    4. Kurauone, Ophias & Kong, Yusheng & Sun, Huaping & Muzamhindo, Simbarashe & Famba, Takuriramunashe & Taghizadeh-Hesary, Farhad, 2021. "The effects of International Financial Reporting Standards, auditing and legal enforcement on tax evasion: Evidence from 37 African countries," Global Finance Journal, Elsevier, vol. 49(C).
    5. Lam, Kevin C.K. & Sami, Heibatollah & Yao, Jun & Yao, Yiwei, 2023. "Mandatory IFRS adoption and earnings management: The role of culture," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 50(C).
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    7. Jude Edeigba & Christopher Gan & Felix Amenkhienan, 2020. "The influence of cultural diversity on the convergence of IFRS: evidence from Nigeria IFRS implementation," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 105-121, July.

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