The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit

Eric O. Boahen and Emmanuel Mamatzakis

Accounting Forum, 2020, vol. 44, issue 2, 103-131

Abstract: This study examines the extent to which religious socials norms of the firm's environment would affect classification shifting and whether such impact would be altered in the presence of firm specific corporate governance characteristics, such as board independence and BIG4 audit. Using a sample of 23,164 US firm-year observations between 2000 and 2015, we find that managers would be deterred to shift revenue items and core expenses from/into special items so as to inflate core earnings in a religious social norm's environment. The religion through the ethical channel would act as a deterrent to unethical managerial behaviour such as classification shifting. We also show that the religion would complement corporate governance and auditor characteristics to mitigate classification shifting. We report results with some variability as we examine the ethical role of religion in reducing classification shifting in rural vs urban areas, in low vs high religious areas, as well as in pre and post financial crisis periods. Finally, we show that regulation also plays a role as the SOX Act (2002) appears to curb opportunistic managerial behaviour, even more so in a religious social norm's environment.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/01559982.2019.1573404 (text/html)
Access to full text is restricted to subscribers.

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:taf:accfor:v:44:y:2020:i:2:p:103-131

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/racc20

DOI: 10.1080/01559982.2019.1573404

Access Statistics for this article

Accounting Forum is currently edited by Carol Tilt

More articles in Accounting Forum from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().