Journal of International Business Studies

, Volume 42, Issue 6, pp 853–874 | Cite as

Effects of national culture on earnings quality of banks

  • Kiridaran Kanagaretnam
  • Chee Yeow Lim
  • Gerald J Lobo


We examine the relation between four dimensions of national culture and earnings quality of banks using a sample of banks from 39 countries. Our main analysis, which focuses on the pre-financial crisis period 1993–2006, indicates that banks in high individualism, high masculinity, and low uncertainty avoidance societies manage earnings to just-meet-or-beat the prior year's earnings. In tests of income smoothing through loan loss provisions, we find that banks in high individualism, high power distance, and low uncertainty avoidance societies report smoother earnings. Our exploratory analysis of the effects of national culture on accounting outcomes during the financial crisis period 2007–2008 indicates that cultures that encourage higher risk-taking experienced more bank troubles in the form of larger losses or larger loan loss provisions.


national culture earnings management earnings quality financial crisis loan loss provisions just-meeting-or-beating earnings 



We thank Robert Mathieu, Amin Mawani, Tharinda Ranasinghe, Lee Radebaugh (the editor), and the three anonymous reviewers for their valuable comments. Kanagaretnam and Lobo thank the Social Sciences and Humanities Research Council of Canada (SSHRC) for its financial support. Kanagaretnam also thanks the Certified Management Accountants (CMA) of Ontario for their financial support.


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Copyright information

© Academy of International Business 2011

Authors and Affiliations

  • Kiridaran Kanagaretnam
    • 1
  • Chee Yeow Lim
    • 2
  • Gerald J Lobo
    • 3
  1. 1.DeGroote School of Business, McMaster UniversityHamiltonCanada
  2. 2.School of Accountancy, Singapore Management UniversitySingapore
  3. 3.C. T. Bauer College of Business, University of HoustonHoustonUSA

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