The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit

Mamatzakis, Emmanuel and Boahen, Eric (2019) The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit. Accounting Forum. ISSN 0155-9982

[img] PDF - Accepted Version
Restricted to SRO admin only until 11 October 2020.

Download (663kB)

Abstract

This study examines the extent to which religious socials norms of the firm's environment would affect classification shifting and whether such impact would be altered in the presence of firm specific corporate governance characteristics, such as board independence and BIG4 audit. Using a sample of 23,164 US firm-year observations between 2000 and 2015, we find that managers would be deterred to shift revenue items and core expenses from/into special items so as to inflate core earnings in a religious social norm's environment. The religion through the ethical channel would act as a deterrent to unethical managerial behaviour such as classification shifting. We also show that the religion would complement corporate governance and auditor characteristics to mitigate classification shifting. We report results with some variability as we examine the ethical role of religion in reducing classification shifting in rural vs urban areas, in low vs high religious areas, as well as in pre and post financial crisis periods. Finally, we show that regulation also plays a role as the SOX Act (2002) appears to curb opportunistic managerial behaviour, even more so in a religious social norm's environment.

Item Type: Article
Keywords: Classification shifting, religiosity, corporate governance, BIG4 audit
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HF Commerce > HF5001 Business > HF5601 Accounting. Bookkeeping
H Social Sciences > HG Finance > HG4001 Finance management. Business finance. Corporation finance
Depositing User: Emmanuel Mamatzakis
Date Deposited: 26 Apr 2019 14:38
Last Modified: 01 Jul 2019 15:47
URI: http://sro.sussex.ac.uk/id/eprint/83418

View download statistics for this item

📧 Request an update