What are the effects of culture and institutions on classification shifting in India?

Boahen, Eric Owusu; Mamatzakis, Emmanuel

doi:10.1016/j.intaccaudtax.2021.100402

Cited by 9 publications

(16 citation statements)

References 70 publications

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“…Nevertheless, FSize is slightly lower than the values revealed by Liem (2021); Thuy et al (2021) which reached (27.146, 28.193) respectively. Meanwhile, the mean value of ROA is (0.055) with minimum and maximum (-1.38, 1.78) respectively, which is consistent with the values reported by Liem (2021); Boahen & Mamatzakis (2021) which reached (0.072, 0.076) respectively, but ROA is higher than the values revealed by Seve & Wilson (2019); Biswas et al (2022) which reached (-0.029, -0.035) respectively. Moreover, the mean value of Lev is (0.491) with minimum and maximum (0.01, 3.18) respectively, which is consistent with the values documented by Sohn (2016); Zalataa & Roberts (2017) which reached (0.479, 0.480) respectively.…”

Section: Resultssupporting

confidence: 89%

“…Finally, the study used numerous control variables that can be associated with FSC and ICS. Following prior studies (e.g., Anagnostopoulou, et al, 2021;Boahen & Mamatzakis, 2021;Nagar, et al, 2021;Almaleki, et al, 2021;Hwang, et al, 2022), the current study includes five control variables. First, firm size (FSize) measured by the natural logarithm of total assets.…”

Section: (Online): Issn 2682-4817mentioning

confidence: 99%

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The Impact of Financial Statement Comparability on Income Classification Shifting: Evidence from Egypt

Elsayed,

Elkholy,

Marzouk

2023

مجلة البحوث المحاسبية

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Purpose -This study examines the impact of financial statement comparability (FSC) on income classification shifting (ICS) measured by expenses classification shifting (ECS) and revenues classification shifting (RCS).Design/methodology/approach -The study uses a quantitative approach to measure the impact of FSC on ICS for a sample of 62 Egyptian-listed firms for the period 2018-2021. The logistic regression analysis and Kruskal-Wallis test were run to test the hypotheses.Findings -The results demonstrate a significant negative impact of FSC on ICS. The study reveals significant differences among the Egyptian Stock Exchange (ESE) sectors regarding RCS, but no significant differences were found concerning ECS and FSC.Originality/value -The study contributes to the existing literature by examining the impact of FSC on ICS that could help regulators and accounting standards setters to alleviate ICS and thus mitigate earnings management in the Egyptian environment. Our findings are of particular importance for investors to help them make better decisions by improving the quality of information related to core earnings. Moreover, the study provides evidence related to the emerging market of Egypt.

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Section: Resultssupporting

confidence: 89%

Section: (Online): Issn 2682-4817mentioning

confidence: 99%

The Impact of Financial Statement Comparability on Income Classification Shifting: Evidence from Egypt

Elsayed,

Elkholy,

Marzouk

2023

مجلة البحوث المحاسبية

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“…In line with prior studies (Behn et al , 2013; Boahen, 2017; Boahen and Mamatzakis, 2021; Fan et al , 2010; Haw et al , 2011; McVay, 2006), we model the core earnings ( CE i,t ) at normal level for firm i and year t as: where core earnings with lag is CE i,t-1 ; asset turnover is ATO i,t and measures sales divided by average net operating assets; accruals with lag is ACCRUALS i,t-1 ; change in sales with lag is ΔSALES i,t ; NEG_ΔSALES i,t is an index that takes value of one if change in sales is less than zero and zero otherwise.…”

Section: Research Design and Empirical Methodologysupporting

confidence: 88%

Section: Research Design and Empirical Methodology 41 Measuring Class...mentioning

confidence: 99%

“…Paredes and Wheatley (2017) extended the literature regarding the interrelationships between national culture and REM for emerging countries, revealing a negative association between REM and Hofstede's (1980) measures of individualism, masculinity and uncertainty avoidance but a positive association with power distance. This interest on the implication of Hofstede's cultural dimensions has been concentrated mainly on abnormal accruals and REM behaviour, with only few studies related with classification shifting (Boahen and Mamatzakis, 2021). These studies are mainly related with USA and with developed countries where the institutional factors seem to enhance the use of classifications shifting.…”

Section: Quality Of Financial Reportingmentioning

confidence: 99%

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Do cultural differences affect the quality of financial reporting in the EU? An analysis of Western EU countries vis a vis Eastern EU countries

Mamatzakis

Neri

Russo

2023

JAOC

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Purpose This study aims to examine the impact of national culture on classification shifting in Eastern European Member States of EU Eastern European countries (EEU) vis-à-vis the Western Member States of EU (WEU). The EEU provides a unique sample to study the quality of financial reporting that the authors measure with classification shifting given that for more than five decades they were following the model of a centrally planned economy, where market-based financial reporting was absent. Yet, the EEU transitioned to a market-based economy and completed its accession to the EU. Design/methodology/approach This study uses a panel data set of firm year observations from 1996 and 2020 that covers the full transition of EEU. This empirical analysis is based on fixed effects panel regression analysis where the authors report a plethora of identifications. Findings This study finds classification shifting in the EEU countries since their transition to the market-based economy, though they have no long record of market-based financial reporting. This study also notices that cultural factors are associated with classification shifting across all Member States of the EU. This study further examines the impact of interactions between cultural characteristics and special items and reveal variability between WEU and EEU. As part of the robustness analysis, this study also tests the impact of culture on real earnings management measures for both WEU vs EEU, confirming the variability of the impact of culture on earnings management. Research limitations/implications Future research could explore the role of religion differences in WEU vis-à-vis EEU states, as they are also subject to cultural differences. Practical implications The findings are important for regulators, external monitors and investors, as they show that cultural factors affect earnings management with some variability across countries in the EU, and they should be acknowledged in policymaking. Social implications The findings show that cultural differences between EEU and the “old” Member States of the EU could explain classification shifting. Originality/value To the best of the authors’ knowledge, this is the first study that sheds light on the impact of national culture on classification shifting in EEU of EU vis-à-vis the “old” WEU of EU.

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How culture and legal environment affect classification shifting? Global evidence

Boahen,

Mamatzakis

2024

Int. J Fin Econ

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This study examines the interplay between various cultural characteristics and the legal environment on classification shifting using a global sample that enables variability in underlying cultural characteristics across countries while controlling for heterogeneity. Given that both culture and the legal environment tend to exhibit low variability over time, our international cross‐country analysis with diverse cultural dimensions and legal frameworks enhances the robustness of our empirical findings. Our identification strategy employs several models and shows the significant impact of culture on classification shifting and the interactions between national culture and the legal environment on classification shifting behaviour, though there is variability across countries. We also find that certain traits of culture induce classification shifting. We highlight that strengthening the legal environment becomes crucial in creating an institutional framework that effectively curbs unethical practices induced by certain national culture traits and enhances transparency and accountability in financial reporting.

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What are the effects of culture and institutions on classification shifting in India?

Cited by 9 publications

References 70 publications

The Impact of Financial Statement Comparability on Income Classification Shifting: Evidence from Egypt

The Impact of Financial Statement Comparability on Income Classification Shifting: Evidence from Egypt

Do cultural differences affect the quality of financial reporting in the EU? An analysis of Western EU countries vis a vis Eastern EU countries

How culture and legal environment affect classification shifting? Global evidence

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