Religiosity and clawback provision to curb earnings management

ABSTRACT This study examines the impact of religiosity and clawback on corporate reporting behavior. Previous research indicates that the supervision and punishment aspects of God, and secular authorities are able to improve prosocial actions. This present study examines whether clawback that has a punishment feature moderates the effect of religiosity on the intention to manipulate earnings. This study uses an experimental method with 266 participants who are personnel from finance departments. Our results suggest that the main effect of religiosity has no significant effect on the reduction of accruals manipulation. However, the interaction of religiosity and clawback has a significant effect. Although we find that clawback strengthens the negative influence of religiosity on accrual manipulation, we find that it strengthens the positive influence of religiosity on manipulation of real activity.