Title: An examination of the agency theory problem of earnings management: is it an Anglo-Saxon cultural phenomenon?

Authors: Ramon P. Rodriguez Jr.; Stephen B. Salter; L. Murphy Smith

Addresses: Department of Accounting, Arthur J. Bauernfeind College of Business, Murray State University, Murray, KY 42071, USA ' Department of Accounting, Business and Aerospace Building (BAS), Middle Tennessee State University, 1301 East Main Street MTSU Box 50, Murfreesboro, TN 37132-0001, USA ' Department of Accounting, Arthur J. Bauernfeind College of Business, Murray State University, Murray, KY 42071-3314, USA

Abstract: The arrangement in which a manager, that is, an agent, works for the benefit of a property owner has been around since the beginning of human history. An early example is found in the parable of the 'shrewd manager', told by Jesus of Nazareth. This study presents empirical evidence to that will be used to determine whether Agency Theory is primarily applicable in Anglo-Saxon countries. Two competing perspectives are evaluated: 1) national cultural variable individualism/collectivism influences agency problems versus; 2) agency problems are a unique Anglo-Saxon problem. Using a sample of firms from 30 counties over a five year window, controlling for location in Anglo-Saxon countries, the national cultural variable is insignificant. Thus, the analysis indicates that the agency problem of earnings management appears to be a unique Anglo-Saxon problem rather than a function of the individualism/collectivism dimension of national culture.

Keywords: agency theory; Anglo-American; Anglo-Saxon countries; collectivism; national culture; earnings management; individualism; international accounting.

DOI: 10.1504/IJCA.2015.073515

International Journal of Critical Accounting, 2015 Vol.7 No.5/6, pp.487 - 511

Received: 25 Jun 2015
Accepted: 26 Jun 2015

Published online: 10 Dec 2015 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article