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Effect of Cultural Environmental and Accounting Regulation on Earnings Management: A Multiple Year-Country Analysis

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  • Liming Guan
  • Hamid Pourjalali

Abstract

We analyze the effect of cultural values and disclosure and earnings management scores on earnings management in 27 countries. The results indicate that debt-to-equity ratio (total assets) affects the earnings management upwards (downwards). These results are consistent with prior studies. Uncertainty Avoidance also affects the direction of earnings management downwards. Other cultural values, such as Individualism, Power Distance, and Masculinity, have a significant effect on the magnitude of earnings management. The results indicate that the higher the values of these variables, the higher the magnitude of earnings management. Furthermore, Disclosure Index has a significant effect on the magnitude of earnings management.

Suggested Citation

  • Liming Guan & Hamid Pourjalali, 2010. "Effect of Cultural Environmental and Accounting Regulation on Earnings Management: A Multiple Year-Country Analysis," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 17(2), pages 99-127.
    • Handle: RePEc:taf:raaexx:v:17:y:2010:i:2:p:99-127
    DOI: 10.1080/16081625.2010.9720856
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    References listed on IDEAS

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    1. Amy Lau & Ronald Ma, 1997. "A Broad Perspective on Financial Reporting in Pacific Asia," World Scientific Book Chapters, in: Ronald Ma (ed.), Financial Reporting In The Pacific Asia Region, chapter 4, pages 55-92, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Heinz, Philip & Patel, Chris & Hellmann, Andreas, 2013. "Some theoretical and methodological suggestions for studies examining accountants' professional judgments and earnings management," Advances in accounting, Elsevier, vol. 29(2), pages 299-311.
    2. Rabeb RIAHI, 2017. "Pratique de gestion des résultats et culture nationale. Quel lien ?," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 8(2), December.
    3. Guangfan Sun & Changwei Guo & Bin Li & Honglei Li, 2023. "Cultural inclusivity and corporate social responsibility in China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    4. Claudia R. Williamson, 2021. "Culture, democracy and regulation," Constitutional Political Economy, Springer, vol. 32(1), pages 98-126, March.
    5. Houqe, Muhammad Nurul & Monem, Reza M. & Tareq, Mohammad & van Zijl, Tony, 2016. "Secrecy and the impact of mandatory IFRS adoption on earnings quality in Europe," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 476-490.
    6. Fuad, Fuad & Juliarto, Agung & Harto, Puji, 2019. "Does IFRS convergence really increase accounting qualities?Emerging market evidence," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 24(48), pages 205-220.
    7. Rabeb RIAHI, 2017. "Pratique de gestion des résultats et culture nationale. Quel lien ?," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 8(2), December.

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