Effects of national culture on earnings quality of banks

By Kiridaran Kanagaretnam, C. Lim, Gerald J. Lobo. 2011

268 citations recorded by the source corpus.

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.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/67cace7dae1895d041d1108d044a9310e009c7bd

How researchers see this paper

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In Accounting

1. Peterson K. Ozili
2. E. Outa
3. David Mhlanga

In Finance

1. Peterson K. Ozili
2. E. Outa

Citations in the corpus

• Influence of National Culture on Accounting Conservatism and Risk Taking in the Banking Industry (2014, unknown): “Unlike Kanagaretnam et al. (2011), who focus on accounting discretion for earnings management, our study’s primary focus is on the links between national culture and accounting conservatism and risk taking.”
• Effects of culture on firm risk-taking: a cross-country and cross-industry analysis (2012, unknown): “While previous literature has studied the effects of culture on risk-taking through OLS (Kanagaretnam et al. 2011) or through GLS methods (Li and Zahra 2012), we make full use of a more recently developed modeling technique, hierarchical linear mixed models (HLM), which can process multilevel data w”
• Bank Loan Loss Provisions Research: A Review (2017, background): “Kanagaretnam, Lim, and Lobo (2011) in a cross-country study examine the relationship between four dimensions of national culture and earnings quality during the pre-financial crisis period and find that banks in high individualism, high power distance and low Electronic copy available at:…”
• Religiosity and Earnings Management: International Evidence from the Banking Industry (2014, unknown): “Kanagaretnam et al. (2011) study the relation between cultural factors and bank earnings quality during the pre-financial crisis and crisis periods.”