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

Article


Boahen, E. O. and Mamatzakis, E. C. 2019. The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit. Accounting Forum.
AuthorsBoahen, E. O. and Mamatzakis, E. C.
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.

JournalAccounting Forum
ISSN0155-9982
Year2019
PublisherTaylor & Francis
Accepted author manuscript
License
File Access Level
Anyone
Digital Object Identifier (DOI)doi:10.1080/01559982.2019.1573404
Web address (URL)https://doi.org/10.1080/01559982.2019.1573404
Publication dates
Online11 Apr 2019
Publication process dates
Accepted18 Jan 2019
Deposited17 Jun 2019
Copyright holder© 2019 Taylor & Francis.
Copyright informationThis is an Accepted Manuscript of an article published by Taylor & Francis in Accounting Forum on 11/04/2019, available online: http://www.tandfonline.com/10.1080/01559982.2019.1573404.
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Accepted author manuscript

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