The Influence of Country-Level Religiosity on Accounting Conservatism

55 Pages Posted: 30 Jun 2017 Last revised: 3 Apr 2021

See all articles by Matt Bjornsen

Matt Bjornsen

University of Nebraska at Kearney

Chuong Do

University of Nevada, Reno

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Date Written: August 15, 2017

Abstract

This study investigates how differences in religiosity (i.e., the strength of religion) across countries influence an important characteristic of financial reporting, accounting conservatism. Prior literature suggests that religious individuals are more risk-averse and have higher ethical standards, while accounting conservatism has been shown to reduce various risks to the firm (e.g., bankruptcy, stock price crashes.) at the expense of higher reported earnings. We find that managers in more religious societies report more conservatively. Specifically, our cross-country analysis reveals that firms headquartered in countries with higher levels of religiosity exhibit, on average, higher accounting conservatism in financial reporting. This positive association is stronger in countries following IFRS or U.S. GAAP, and weaker in countries with a high degree of uncertainty avoidance and in countries with greater numbers of religions.

Keywords: Financial reporting, Accounting conservatism, Religiosity, Informal Monitoring

JEL Classification: G34, M41, Z12

Suggested Citation

Bjornsen, Matt and Do, Chuong and Omer, Thomas C., The Influence of Country-Level Religiosity on Accounting Conservatism (August 15, 2017). Bjornsen, M., Do, C., & Omer, T. C. (2019). The influence of country-level religiosity on accounting conservatism. Journal of International Accounting Research, 18(1), 1-26., Available at SSRN: https://ssrn.com/abstract=2994336 or http://dx.doi.org/10.2139/ssrn.2994336

Matt Bjornsen

University of Nebraska at Kearney ( email )

Kearney, NE 68849
United States

Chuong Do (Contact Author)

University of Nevada, Reno ( email )

1664 N. Virginia St
Reno, NV 89557
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

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