April 2019 SRO- Religion and Classification Shifting.pdf (647.54 kB)
The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit
journal contribution
posted on 2023-06-09, 17:39 authored by Emmanuel Mamatzakis, Eric BoahenThis 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.
History
Publication status
- Published
File Version
- Accepted version
Journal
Accounting ForumISSN
0155-9982Publisher
Taylor & FrancisExternal DOI
Department affiliated with
- Accounting and Finance Publications
Full text available
- Yes
Peer reviewed?
- Yes