Effects of national culture on earnings quality of banks

Kanagaretnam, Kiridaran; Lim, Chee Yeow; Lobo, Gerald J.

doi:10.1057/jibs.2011.26

Cited by 253 publications

(161 citation statements)

References 33 publications

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“…That is, national cultural values exhibit explanatory power relating to earnings management after controlling for other institutional factors affecting managerial motivations. This is an extension of, but also complementary to, previous studies such as Guan et al (2005), Han et al (2010) and Kanagaretnam et al (2011). Our evidence leads to the conclusion that accountants and managers in more individualistic countries tend to be more aggressive in exercising earnings measurement discretion while those in more uncertainty avoiding countries tend to be less aggressive.…”

Section: Discussionsupporting

confidence: 82%

Earnings Management in Europe Post IFRS: Do Cultural Influences Persist?

et al. 2015

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We investigate the extent to which the mandatory adoption of International Financial Reporting Standards (IFRS) has restricted the previously documented association between national culture and international differences in earnings management practices. We analyze the earnings management behavior of publicly listed firms in 14 member countries of the European Union during the period 2000-2010. Our findings show that the tendency to engage in earnings management continues post IFRS and that cultural factors remain influential in explaining differences in the magnitude of earnings management behavior across countries.

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Section: Discussionsupporting

confidence: 82%

Earnings Management in Europe Post IFRS: Do Cultural Influences Persist?

et al. 2015

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“…Ahern et al (forthcoming) document that cultural differences have a substantial impact on multiple aspects of cross-border mergers. Other studies have also documented that cultural differences affect capital structure (Chui et al, 2002), dividend payout policy (Shao et al, 2010), growth and innovation (Gorodnichenko and Roland, 2010), and earnings quality (Kanagaretnam et al, 2011).…”

Section: Relevant Literature and Hypothesis Developmentmentioning

confidence: 99%

“…For instance, Kanagaretnam et al (2011) find that in highly individualistic cultures, managers would adopt a low dividend payout and retain more cash in the firm as higher cash holdings enable the managers to make their own decisions when investment opportunities arise. The authors also show that firms in mastery countries have lower dividend payouts and that mastery shareholders are more tolerant of managers who retain high cash as they trust the manager's ability, and this trust offsets the shareholders concerns about agency problems to a certain extent.…”

Section: Other Robustness Checksmentioning

confidence: 99%

National culture and corporate cash holdings around the world

Chen

Dou

Rhee

et al. 2015

Journal of Banking & Finance

292

232

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a b s t r a c tThis paper examines whether cultural dimensions explain the variation in corporate cash holdings around the world as well as within the United States. We establish four major findings. First, in an international setting, corporate cash holdings are negatively associated with individualism and positively associated with uncertainty-avoidance. Second, individualism and uncertainty avoidance influence the precautionary motive for holding cash. Third, firms in individualistic states in the United States hold less cash than firms in collectivistic states. Fourth, we show that individualism is positively related to the firm's capital expenditures, acquisitions, and repurchases while uncertainty avoidance is negatively related. Our findings remain unchanged after controlling for governance factors, firm attributes, and country characteristics.

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“…Previous research (Gray, 1988;Kwok and Tadesse, 2006;Han et al, 2010;Kanagaretnam et al, 2011 demonstrates that banks in countries characterized by high individualism and low uncertainty avoidance take higher risks and engage more in earnings manipulation. Inclusion of these additional control variables does not alter our conclusions.…”

Section: Sensitivity Analysismentioning

confidence: 99%