Effect of Cultural Environment on Earnings Manipulation: A Five Asia-Pacific Country Analysis

This study examines the possible impact of cross-country differences in culture on earnings management or choices of accounting accruals in five Asia-Pacific countries: Australia, Japan, Hong Kong, Malaysia and Singapore. A set of traditional and cultural variables were used to test the hypotheses d...

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Bibliographic Details
Published in:Multinational business review 2005-06, Vol.13 (2), p.23-41
Main Authors: Guan, Liming, Pourjalali, Hamid, Sengupta, Partha, Teruya, Jenny
Format: Article
Language:English
Subjects:
Accounting procedures
Accruals
Collectivism
Cost control
Cultural differences
Cultural values
Culture
Earnings
Earnings management
Femininity
Hypotheses
Individualism
Management decisions
Masculinity
Studies
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Summary:This study examines the possible impact of cross-country differences in culture on earnings management or choices of accounting accruals in five Asia-Pacific countries: Australia, Japan, Hong Kong, Malaysia and Singapore. A set of traditional and cultural variables were used to test the hypotheses developed in the paper. The results indicate that both the traditional variables (size and debt-equity ratio) and cultural variables (individualism, power distance, uncertainty avoidance and long-term social values) can explain the choices of accounting accruals in different countries. This paper is the first that links earnings management to cultural values and indirectly provides evidence that accounting values (as defined by Gray, 1998) affect earnings management.
ISSN:1525-383X
2054-1686
DOI:10.1108/1525383X200500007