How Does Culture Impinge Upon Managers’ Demeanor of Earnings Management? Evidence from Cross-Country Analysis

We examine the impact of national culture on earnings. Specifically, we managers’ likelihood using accrual or real earnings management (REM) and role various attributes (accruals quality, persistence, smoothing, predictability). measure Hofstede’s six dimensions (1984, 2001, 2010). Using data from 36 countries during 1997–2018, find that managers are likely to use both accruals REM in high power distance (PDI) countries. In long-term-oriented countries, more REM. uncertainty avoidance (UAI) individualist higher indulgent versus restraint less either type management. masculine tend lower rely production cost also substitutes for each other. addition, able classify into four quality groups based (primarily driven by predictability, smoothing). Persistence is generally not significant classifying attributes. Our findings indicate a universal set accounting standards challenging goal achieve given cultural diversity across To improve existing corporate governance framework ensure uniform financial statements, enforcement should be tailored specific cultures, at minimum, boards need culturally diversified.