Earnings management in the financial sector: A systematic review through the fraud diamond and Hofstede’s cultural dimensions

Sophia Wattimena (), Maya Malinda () and Surya Setyawan ()

International Journal of Innovative Research and Scientific Studies, 2025, vol. 8, issue 5, 1376-1387

Abstract: Earnings management in the financial sector remains a critical issue due to its potential to mislead regulators, investors, and other stakeholders about the true financial condition and stability of financial institutions. This study examines earnings management practices in the financial sector by exploring their underlying causes, cultural influences, and commonly used tools. This study uses a Systematic Literature Review approach, with 41 selected articles based on specific inclusion criteria. The selected articles were subjected to bibliometric and descriptive analysis. The findings confirm that the elements of the fraud diamond theory are significant determinants of earnings management. Analyzed through the lens of Hofstede’s cultural dimensions, deeper cultural traits such as short-term orientation and high masculinity are found to further reinforce earnings management practices. Moreover, loan loss provisions seem to be the most common tool used for earnings management in the financial sector. This research offers insights into the implications and determinants of earnings management and how culture correlates with fraud theory. By recognizing how cultural values shape managerial behavior, more effective detection and prevention strategies for earnings manipulation can be developed.

Keywords: Earnings management; Fraud diamond; Hofstede cultural dimensions; Regulatory framework; Systematic literature review. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ijirss.com/index.php/ijirss/article/view/9137/2046 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aac:ijirss:v:8:y:2025:i:5:p:1376-1387:id:9137

Access Statistics for this article

International Journal of Innovative Research and Scientific Studies is currently edited by Natalie Jean

More articles in International Journal of Innovative Research and Scientific Studies from Innovative Research Publishing
Bibliographic data for series maintained by Natalie Jean ().