Culture's consequence: The relationship between income-increasing earnings management and IAS/IFRS adoption across cultures

Research has shown that earnings management has increased amongst firms in Europe post-IFRS adoption, but the association between IFRS adoption and earnings management is not uniform across countries. We propose the culture of a firm's country of origin relates significantly with changes in earnings management pre- and post-IFRS adoption. We test our proposition using the Hofstede Model of Cultural Dimensions and find a significant increase in income-increasing earnings management after IFRS adoption amongst firms based in countries that are more power distant, uncertainty avoidant, individualistic, short-term oriented, and indulgent.