The purpose of this paper is to investigate the influence of cultural norms on earnings management (EM) practices and the moderating role of women executives, particularly chief financial officers (CFOs), in shaping these culturally driven behaviors. Despite extensive research on firm-specific and formal institutional determinants of EM, the interaction between informal institutions, such as national culture, and executive gender remains underexplored. The authors address two key questions: how cultural values influence discretionary reporting across countries, and whether women executives mitigate or amplify culturally embedded tendencies toward EM.
A cross-country empirical investigation is conducted using 7,999 firm-year observations across 20 countries from 2002 to 2019. The authors use six cultural dimensions from the GLOBE project − performance orientation, assertiveness, future orientation, institutional collectivism, power distance and uncertainty avoidance − and accrual-based earnings management (AEM). Multivariate regressions analyze the relationship between cultural dimensions and AEM, with CFO gender included as a moderating variable.
The results indicate that cultural dimensions significantly affect EM practices, with higher levels of AEM observed in countries scoring high on performance orientation, assertiveness, future orientation, power distance and uncertainty avoidance. Women CFOs amplify this effect, supporting the “Queen Bee” effect, whereby women executives may adopt opportunistic behaviors to assimilate into male-dominated cultures.
This study contributes to the literature by integrating cultural and behavioral factors to explain cross-country variations in EM and using the GLOBE framework, a more comprehensive typology of culture than traditional Hofstede-based approaches. The authors emphasize that balanced gender diversity can strengthen ethical conduct and corporate governance when considered in conjunction with cultural pressures.
