Perceptions of earnings management: the effect of national culture

Marshall A. Geiger, Brendan T. O'Connell, Paul M. Clikeman, Elena Ochoa, Kristen Witkowski, Ilias G. Basioudis

Research output: Contribution to journalArticlepeer-review


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 (Merchant & Rockness, 1994). 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.
Original languageEnglish
Pages (from-to)175-199
Number of pages25
JournalAdvances in International Accounting
Publication statusPublished - 2006


  • reported earnings
  • national culture
  • earnings management
  • earnings management practices


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