Stephen B. Salter

Corporate financial disclosure in emerging markets: Does economic development matter?

Abstract This paper breaks with previous research by concentrating on emerging market economies rather than developing countries. It tests the relationship between corporate financial disclosure and the sophistication of economies and capital markets within the context of the extant Cooke and Wallace (1990) model. It finds that, as posited in the model, firms in developed market economies have a significantly higher mean level of effective disclosure than those in emerging market economies. These differing levels of disclosure are modified by the importance of capital markets and a relatively low level of the uncertainty avoidance culture variable. The study also finds that the level of corporate disclosure is positively related to prior levels of corporate financial disclosure regulation and is directly related to the ability to draw future foreign portfolio investment.

Agency effects and escalation of commitment: do small national culture differences matter?

Abstract In order to test for hypothesized effects of national culture on management control systems with a cost-effective sample size, most cross-cultural studies rely on large differences in culture in their experimental design. However, much of the worlds cross-border investment takes place between nations that are culturally close, for example, the USA, Canada and the UK. Case evidence indicates that even apparently small cultural differences, such as that between the USA and Canada, can be particularly troublesome since it is widely assumed that small differences do not matter, when, in fact, they do. This study explores the effect of an apparently small difference in national culture on the ability of agency theory to explain escalation of commitment to failing projects in two countries with significant cross-border investment, i.e., USA and Canada. We found that the effect of adverse selection conditions was significantly stronger among managers from the more individualist USA. We also found that more experienced managers were less likely to escalate commitment. We discuss the implications of this finding for the design of control systems in US–Canada cross-border subsidiaries.

Attitudes towards Uniform Accounting: Cultural or Economic Phenomena?

The existing literature suggests that uniformity versus flexibility is a key dimension of differentiation in cross-national financial reporting practices. However, the issue of what drives attitudes towards uniformity has not been explored. Drawing upon a variety of existing studies, this study explores the attitudes of “Big 6” auditors in 23 countries towards rules mandating a single treatment across 14 issues. The study finds that auditors are in favor of a single mandated treatment in the majority of cases and that support for such rules is affected by both culture and the importance of the domestic stock market to the country. These results hold true even after the influence of extant practice or the level of uniformity of current practice is controlled for. Relatively higher levels of uniformity in de facto financial reporting practices and relatively stronger support for increased uniformity were both found in many of those countries which are traditionally thought of as having more flexible financial accounting systems.

Europe and America – together or apart: An empirical test of differences in actual reported results

Abstract The accounting convergence debate has assumed an Anglo-American vs. Continental European dichotomy. Alexander and Archer (2000) using logical analysis and d’Arcy (2001) using regulations suggest a different truth, an EU group including the U.K. vs. an American-led group. This view has been debated without result in Nobes (2003, 2004), Alexander and Archer (2003), and d’Arcy (2004). This study brings some closure by using actual reported results from recent 20-F filings. It finds the Anglo-American accounting model vs. Continental European dichotomy unsustainable.

Otra Empanada en la Parilla: Examining the Role of Culture and Information Sharing in Chile and Australia

One of the biggest assets of a firm is its information base. Included in this information base is a knowledge of prior errors and failures. Extant research suggests that while the propensity to share bad news (i.e. a prior error) is dependent on the cost of sharing, the perceived value of that cost may be culturally dependent. One area of interest that has received substantial attention in the prior literature has been cross-cultural differences in negative information sharing in general, as well as the particular context in which the individuals superior is either present or absent during the information-sharing process. Our study examines the role of the two cultural values (individualism/collectivism and to a lesser extent power distance) in explaining national differences in information sharing. By focusing on a sample from Chile and Australia, we were able to remove the regional cultural dimension of face, which has been inherent in prior studies that used Greater China as the representative of a collectivist society. Results from our quasi experiment show that when a supervisor is present during information sharing, collectivist Chilean decision-makers are more willing to share negative information with their colleagues than their counterpart and individualist Australian decision-makers. Our results also show that when a supervisor is absent, both Australian and Chilean decision-makers are willing to share more negative information but the increase in the Australian propensity is significantly greater than that of the Chileans.

Examining the Role of Culture and Acculturation in Information Sharing

In the current environment, an important firm asset is the employee knowledge base, which in a large part depends on employee willingness to share information. Yet prior research has noted that while employees are delighted to reveal success they are often reluctant to reveal errors. While there are many factors affecting managers’ reluctance to reveal errors, this study focuses on cultural differences between Chinese migrants and Anglo residents as well as the role of acculturation. This is particularly relevant given the very significant foreign direct investment into China, and migration of managers and high-end technical staff from portions of Greater China to the management and higher technical classes of the Anglo world. Prior studies including Chow, Harrison, McKinnon, and Wu (1999a). Accounting, Organizations and Society, 24, 561–582, Chow, Deng, and Ho (2000). Journal of Management Accounting Research, 12, 65–95, and Tinsley and Pillutla (1998). Journal of International Business Studies, 29(4), 711–728, provide conflicting views and evidence for differences in information sharing between Chinese and Anglo managers, and there is no accounting or management literature that deals with changes in information sharing behavior in the migration process. This study employs an experiment to test for differences in individuals’ willingness to share information about a prior costing error. Using a sample of students from two different nationalities drawn from a major Australian university (Australian and Hong Kong SAR, China), this study finds that migrant Chinese share less information than Anglo-Australians. This study further provides empirical evidence that the relative change in willingness to share this information when the supervisor is removed from the decision context is lower for the migrant Chinese than for the Anglo-Australians. Finally, this study finds evidence for acculturation as the willingness of migrant Chinese managers changes with the length of their stay in the new society. Acculturation occurs relatively quickly and highly acculturated Chinese information-sharing behavior is not significantly different from the Australian-born subjects.

The IASC comparability project: A cross-national comparison of financial reporting practices and IASC proposed rules

Abstract The International Accounting Standards Board (IASC) issued Exposure Draft 32 in 1989, which led to the revision of 10 international accounting standards (IASs), all of which substantially reduce the amount of choice available to companies when choosing which financial accounting practices to follow. This article assesses the extent to which the current financial reporting practices of 27 IASC member countries agree with the new international accounting standards. The results indicate that while the overall level of agreement with the revised standards is high, there are considerable differences both among issues and among countries. Companies in many countries will have to significantly change their accounting practices in certain areas if they are to comply with the new IASs. This is particularly true of companies in countries with code law-based legal systems and more conservative accounting practices. There is also generally less agreement over issues such as treatment of mergers, accounting for development costs, recognition of revenues on long-term contracts, treatment of differences due to the translation of the income statement at rates other than the closing rate, and changes in the costs of retirement benefits.

U.S. and Mexican Foreign Exchange Risk Management Techniques

This chapter will compare the usage and perceptions of a selection of foreign exchange risk management products among large U.S. and Mexican companies. Some significant differences in the utilization of products, perspectives on key factors in product selection, and attitudes to innovation can be found. The chapter will also explore factors that may influence these differences.