RT Article
T1 Religiosity and Earnings Management: International Evidence from the Banking Industry
JF Journal of business ethics
VO 132
IS 2
SP 277
OP 296
A1 Kanagaretnam, Kiridaran
A1 Lobo, Gerald J.
A1 Wang, Chong
A2 Lobo, Gerald J.
A2 Wang, Chong
LA English
YR 2015
UL https://ixtheo.de/Record/1785656082
AB Using an international sample of banks, we study how differences in religiosity across countries affect earnings management. Given that religiosity is a major source of morality and ethical behavior, it may reduce excessive risk taking and act as deterrence for earnings manipulations. Therefore, we predict lower earnings management in societies that have higher religiosity. Consistent with expectations, our cross-country analysis indicates that religiosity is negatively related to income-increasing earnings management for loss-avoidance and just-meeting-or-beating prior year’s earnings. We also find that religiosity reduces income-increasing earnings management through abnormal loan loss provisions. In additional tests, we document that religiosity increases the information value of bank earnings, with both earnings persistence and cash flow predictability being enhanced by higher religiosity. For the crisis period analysis (i.e., 2007–2009), our evidence shows that banks in countries with higher religiosity exhibit lower probability of reporting asset deterioration and lower probability of having poor performance.
K1 M42
K1 M41
K1 G21
K1 G14
K1 Loan loss provisions
K1 Earnings benchmarks
K1 Earnings management
K1 Morality
K1 Ethics
K1 Religion
DO 10.1007/s10551-014-2310-9