Level of agency cost driven by cultural and corruption and earnings management: Evidence of South East Asia countries

Andi Manggala Putra, Gagaring Pagalung, Abdul Hamid Habbe

Abstract


Purpose: This study scrutinises the correlation between earnings quality and agency cost based on corruption level and cultural values in six South-East Asian (SEA) countries: Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

Design/methodology: We restrict categorisation of each SEA country whether they have low or high agency cost. This study employs 581 firm-years observations from the 30 biggest market capitalisation firms of six SEA countries. We run multiple regressions of three main accrual models for main analysis (Jones, 1991; Dechow et al., 1995; Kasznik, 1999) to get discretionary accruals.

Findings: Results show that firms in low agency cost countries have lower earnings quality, and indicate that earnings management behaviour in this study is efficient rather than detrimental. Furthermore, results present that firms with bigger size engage less in earnings management conduct compared to their counterparts.

Originality/value: This study provides broader acknowledgement of how cultural values and corruption and their assumed correlation to agency cost could affect earnings management behaviour in South East Asia. We use a single proxy of high/low agency cost based on national cultural and corruption index.


Keywords


Cultural values, corruption level, earnings management, South East Asia

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DOI: http://dx.doi.org/10.3926/ic.1289


Licencia de Creative Commons 

This work is licensed under a Creative Commons Attribution 4.0 International License

Intangible Capital, 2004-2018

Online ISSN: 1697-9818; Print ISSN: 2014-3214; DL: B-33375-2004

Publisher: OmniaScience