An analysis of earnings management: A comparison of seven countries.

This article examines the systematic differences in earnings management including the possible impact of cross-country differences in culture on earnings management in seven countries: India, Hong Kong (China), Japan, France, the United Kingdom, Canada, and the United States. A set of traditional financial variables (firm performance, business cycles) and cultural variable (Uncertainty Avoidance, Individualism, Power Distance) were used to test the hypotheses developed in this paper. Regression results indicate both the traditional financial variables and cultural variables can explain the choices of accounting accruals in different countries when the Jones Model serves as a dependent variable. Also, the Jones Model provides the most statistical explanatory power in the regression model on the international level. This paper's primary contribution to the existing literature is the thorough analysis of discretionary accruals and their relationship to traditional financial variables and cultural variable using a large data set. --Leaf ii.