Title

Effects of National Culture on Earnings Quality of Banks

Publication Type

Journal Article

Publication Date

6-2011

Abstract

We examine the relation between four dimensions of national culture and earnings quality of banks using a sample of banks from 39 countries. Our main analysis, which focuses on the pre-financial crisis period 1993–2006, indicates that banks in high individualism, high masculinity, and low uncertainty avoidance societies manage earnings to just-meet-or-beat the prior year's earnings. In tests of income smoothing through loan loss provisions, we find that banks in high individualism, high power distance, and low uncertainty avoidance societies report smoother earnings. Our exploratory analysis of the effects of national culture on accounting outcomes during the financial crisis period 2007–2008 indicates that cultures that encourage higher risk-taking experienced more bank troubles in the form of larger losses or larger loan loss provisions.

Keywords

national culture, earnings management, earnings quality, financial crisis loan loss provisions, justmeetingorbeating earnings

Discipline

Accounting | Finance and Financial Management

Research Areas

Financial Performance Analysis

Publication

Journal of International Business Studies

Volume

42

Issue

6

First Page

853

Last Page

874

ISSN

0047-2506

Identifier

10.1057/jibs.2011.26

Publisher

Palgrave