Title: Culture and earnings quality in cross-border acquisitions

Authors: Jagjit S. Saini; Gaurav Kumar; Jim P. DeMello

Addresses: Western Michigan University, 1903 W. Michigan Ave., Kalamazoo, MI 49008-5402, USA ' University of Arkansas at Little Rock, 2810 S. University Ave., Little Rock, AR 72204, USA ' Western Michigan University 1903 W. Michigan Ave., Kalamazoo, MI 49008-5420, USA

Abstract: This paper examines the effect of culture on earnings quality following cross-border acquisitions using a sample of US public firms acquiring foreign firms. We find that, in general, the earnings quality of the US acquirer declines during the post-acquisition period in a cross-border acquisition of a foreign firm. In addition, we find that the culture of the foreign target impacts the earnings quality of the US acquirer during the post-acquisition period. Using the Hofstede's (1980) cultural dimensions, we specifically find that the degree of individualism and uncertainty avoidance prevalent within the target nation impact the earnings quality of the US acquirer.

Keywords: culture; earnings quality; individualism; uncertainty avoidance; cross-border acquisitions.

DOI: 10.1504/IJBAF.2021.116096

International Journal of Behavioural Accounting and Finance, 2021 Vol.6 No.3, pp.189 - 208

Received: 12 Jun 2017
Accepted: 22 Jan 2018
Published online: 12 Jul 2021 *

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