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

Liming Guan and Hamid Pourjalali

Asia-Pacific Journal of Accounting & Economics, 2010, vol. 17, issue 2, 99-127

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.

Date: 2010
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DOI: 10.1080/16081625.2010.9720856

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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