Languages and earnings management

Authors

Jaehyeon Kim
Yongtae Kim, Santa Clara UniversityFollow
Jian Zhou

Document Type

Article

Publication Date

4-6-2017

Publisher

Elsevier B.V.

Abstract

We predict that managers of firms in countries where languages do not require speakers to grammatically mark future events perceive future consequences of earnings management to be more imminent, and therefore they are less likely to engage in earnings management. Using data from 38 countries, we find that accrual-based earnings management and real earnings management are less prevalent where there is weaker time disassociation in the language. Our study is the first to examine the relation between the grammatical structure of languages and financial reporting characteristics, and it extends the literature on the effect of informal institutions on corporate actions.

Comments

© 2017 Elsevier B.V. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/.

Recommended Citation

Kim, J., Kim, Y., & Zhou, J. (2017). Languages and earnings management. Journal of Accounting and Economics, 63(2), 288–306. https://doi.org/10.1016/j.jacceco.2017.04.001