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A cross-country study on the effects of national culture on earnings management

Sam Han, Tony Kang, Stephen Salter and Yong Keun Yoo
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Sam Han: Singapore Management University, Singapore, Singapore
Tony Kang: Florida Atlantic University, Davie, USA
Stephen Salter: University of Texas at El Paso, El Paso, USA
Yong Keun Yoo: Korea University, Seoul, Korea

Journal of International Business Studies, 2010, vol. 41, issue 1, 123-141

Abstract: This study hypothesizes and tests whether the degree to which managers exercise earnings discretion relates to their value system (i.e., culture) as well as the institutional features (i.e., legal environment) of their country. We find that uncertainty avoidance and individualism dimensions of national culture explain managers' earnings discretion across countries, and that this association varies with the strength of investor protection. This study extends prior literature by documenting that both national culture and institutional structure are important factors that explain corporate managers' earnings discretion practices around the world, and that the influences of these factors on earnings discretion are conditional on each other.

Date: 2010
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