Cultural Determinants of Corporate Governance: A Multi-Country Study (original) (raw)
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2021
The aim of the study was to analyze the influence of the dimensions of national culture on the relationship between corporate governance (CG) and earnings management (EM). There is evidence that in certain cultural contexts CG mechanisms appear to be ineffective in minimizing EM. Studies on governance and its influence on accounting information quality can help market participants make better decisions. It is important to include the cultural context in this relationship as it sheds light on an aspect that has hardly been explored in the research, which can improve the informational environment of organizations. In practical terms, the results may contribute to organizations paying more attention to the cultural influence of countries when implementing or improving their governance mechanisms, with the aim of making them more effective in aligning interests and monitoring behaviors in organizations. Moreover, market participants may require alterations in these mechanisms in more in...
Earnings Management and Cultural Values
American Journal of Economics and Sociology, 2011
Using theory and empirical data from social psychology to measure for cultural differences between countries, this research studies the effect of individualism, defined as the degree to which individuals are integrated into groups (Hofstede 1980), and egalitarianism, defined as a society's cultural orientation with respect to intolerance for abuses of market and political power (Schwartz 1994, 2004) on earnings management. This research finds a significant cultural influence on earnings management. Specifically, the results show that countries scoring high on individualism tend to have lower levels of earnings management. Using the Schwartz (1994, 2004) framework, this study finds that egalitarianism is negatively related to earnings management. The analysis shows that, besides the formal investor protection, it is relevant to consider cultural differences to explain earnings management. This analysis also supports the idea that culture may be an important element in the discussion of global convergence towards a single corporate governance model, or the implementation of corporate governance codes inspired by codes from societies with different cultural values.
The Effect of Institutional and Cultural Factors on the Perceptions of Earnings Management
Journal of International Accounting Research, 2010
In this study we examine the effect of stakeholder orientation versus shareholder orientation, and the level of cultural secrecy on individuals' perceptions of earnings management practices. Examining perceptions from 1,260 participants from 13 countries indicates that individuals from stakeholder-oriented institutional backgrounds were less accepting of earnings management, including both accounting earnings management and operating earnings management activities, than participants from shareholder-oriented institutional backgrounds, and that individuals from secretive cultures were more accepting of both types of earnings management activities. Our findings provide evidence of the anticipated perceptual differences across countries with respect to earnings management and suggest the need for further research linking perceptions to reported earnings management measures.
Cultural Relativism in Earnings Management
2013
The purpose of this study is to examine the possible impact of value systems on earnings management in France, Tunisia and Canada. Cultural values include power distance, uncertainty avoidance, individualism, masculinity and long-term orientation. The cross-cultural study uses the method of structural equations trough LISREL approach. The examination covers the period between 2003 and 2009. Findings show first of all, that ecological factors are able to determine cultural dimensions in the sample countries. Secondly, we found that all studied cultural dimensions are able to define national culture in the sample countries. Yet, results indicate that only three of cultural dimensions are significant in explaining differences in earnings management in the studied context. In fact earnings management seems to be positively related to uncertainty avoidance and negatively related to power distance and individualism.
Perceptions of earnings management: The effect of national culture
Manipulating, or ''managing,'' reported earnings is a temptation faced by every accountant and corporation around the world. This study investigates whether national culture influences perceptions of the acceptability of earnings management. Participants from eight countries evaluated 13 vignettes describing various earnings management practices . Our results demonstrate considerable variation in perceptions across nations to the earnings management scenarios, providing strong evidence that the practice of earnings management was not perceived similarly in all countries. Using Hofstede's (1991) cultural indices, we find that the differences in aggregate perceptions across countries were not closely associated with any of the cultural dimensions examined. We do, however, find that perceptions of earnings manipulations involving the timing of operating decisions were associated with both the Power Distance Index and the Masculinity Index.
Perceptions of Earnings Management: The Effects of National Culture
Advances in International Accounting, 2006
Manipulating, or ''managing,'' reported earnings is a temptation faced by every accountant and corporation around the world. This study investigates whether national culture influences perceptions of the acceptability of earnings management. Participants from eight countries evaluated 13 vignettes describing various earnings management practices . Our results demonstrate considerable variation in perceptions across nations to the earnings management scenarios, providing strong evidence that the practice of earnings management was not perceived similarly in all countries. Using Hofstede's (1991) cultural indices, we find that the differences in aggregate perceptions across countries were not closely associated with any of the cultural dimensions examined. We do, however, find that perceptions of earnings manipulations involving the timing of operating decisions were associated with both the Power Distance Index and the Masculinity Index.
SUPPORTED BY UNIGESTION “ National Culture , Corporate Governance Practices , and Firm Performance
2015
We contrast the universalist and cultural perspectives on “good” corporate governance practices. Using a new database from Governance Metrics International featuring highly granular measures of corporate governance practices across a large number of countries for 2006-2011, we find that the national cultural dimension of individualism is positively associated with accountability and transparent disclosure, and with corporate behavior standards, and that uncertainty avoidance is negatively associated with accountability and transparent disclosure, and with minority shareholder protection. Within countries, there is a largely positive association between firm-level “good” corporate governance practices and firm performance; however, across countries, the association is largely negative. Monday, April 20, 2015, 10:30-12:00 Room 125, Extranef building at the University of Lausanne National Culture, Corporate Governance Practices, and Firm Performance* First version: January 2012 This ve...
Corporate Governance, Firm Characteristics and Earnings Management in an Emerging Economy
The main objective of this paper is to investigate the influence of corporate governance and firm specific characteristics on earnings management by Kenyan listed companies. Using panel data of 148-firm years obtained from the annual reports of the 37 companies listed on the Nairobi Stock Exchange (NSE), the study found that ownership structure and Board Composition were the main corporate governance characteristics influencing earnings management by Kenyan listed Companies. Highly leveraged firms were found to be more likely to engage in earnings management. The results of this study are important to the Kenya Capital Markets Authority (KCMA) and other accounting regulators in Kenya, in the determination of whether to develop more corporate governance guidelines so as to improve the quality of information reported by Listed Companies. The study is also important to investors in developing countries, who must interpret financial statement numbers reported in the companies while making investment decisions. Furthermore, the study contributes to our understanding of how corporate governance influences financial reporting in developing economies, such as Kenya.
Corporate Governance: Implications From A Cultural Perspective
Analele Stiintifice Ale Universitatii Alexandru Ioan Cuza Din Iasi Stiinte Economice, 2010
This article aims to research the ample cultural implications behind the expansion and adoption of corporate governance principles and practices and on the cultural differences inherent in the process of translation /localisation of American, English or transnational practices towards continental Europe. More precisely, in the last part of this article, we shall compare the Olivencia rapport from Spain and the Code Corporate Governnace Code of the Bucharest Stock Exchange, with a view to analyzing how elements of national culture influence the transfer of corporate governance principles.
National Culture, Corporate Governance Practices, and Firm Performance
SSRN Electronic Journal, 2000
We examine why corporate governance varies widely across countries and across firms, and why such variation matters. Using a new database from Governance Metrics International on corporate governance practices across a large number of countries and firms for 2006-2011 and employing a hierarchical linear model specification, we find that the national cultural dimension of individualism is positively associated with, whereas the national cultural dimension of uncertainty avoidance is negatively associated with, firmlevel corporate governance practices. Within countries, there is a positive association between firm-level corporate governance practices and firm value; however, across countries, the association is negative or zero.