What are the effects of culture and institutions on classification shifting in India?

Article


Boahen, E. O. and Mamatzakis, E. C. 2021. What are the effects of culture and institutions on classification shifting in India? Journal of International Accounting, Auditing and Taxation. (Art. 100402). https://doi.org/10.1016/j.intaccaudtax.2021.100402
AuthorsBoahen, E. O. and Mamatzakis, E. C.
Abstract

This study investigates the impact of culture, religion, and legal environment on classification shifting behavior in India. Using a sample of 30,361 firm-year observations from 2000 and 2015, we employ a panel regression analysis that accounts for heterogeneity across industries and time. We find that misclassification of expenses is present in India, and that religion helps moderate classification shifting. However, certain dimensions of culture such as individualism, power distance, uncertainty avoidance, and masculinity increase classification shifting, whereas long-term orientation mitigates it. We also examine various indirect channels involving interactions between the legal environment, religion, and various dimensions of culture and find variable results that suggest underlying complexities. In the weak Indian legal environment, religion does not appear sufficient to combat classification shifting practices. The findings have policy implications: we argue that strengthening the legal environment would complement religion in constraining managerial motivation to misclassify core expenses into special items to boost reported core earnings.

JournalJournal of International Accounting, Auditing and Taxation
Journal citation(Art. 100402)
ISSN1061-9518
Year2021
PublisherElsevier
Accepted author manuscript
License
File Access Level
Anyone
Digital Object Identifier (DOI)https://doi.org/10.1016/j.intaccaudtax.2021.100402
Publication dates
Online03 Jun 2021
Publication process dates
Accepted29 Oct 2020
Deposited14 Jun 2021
Copyright holderCrown Copyright © 2021
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The impact of religion on classification shifting in the presence of corporate governance and BIG 4 audit
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. 44 (2), pp. 103-131. https://doi.org/10.1080/01559982.2019.1573404