The Role of National Culture and Corruption on Real Earnings Management Around the World

Using a sample from 27 countries, this study examines whether cultural values impact managers’ real earnings management (REM) behaviors. The results indicate that uncertainty avoidance and individualism can explain the variations in REM practices across countries. Building upon the study by Lewellyn and Bao (2017), this paper examines whether cultural dimensions influence the relationship between corruption and REM. Individualism does not significantly moderate the relationship between corruption and REM. I also find that the interaction between uncertainty avoidance and corruption is negative, indicating that uncertainty-avoiding managers are less likely to manage earnings in a country with a higher level of corruption.