Historical Abstracts

Philip Heinz

Ph.D. Student, Macquarie University, Australia.

Chris Patel

Professor, Macquarie University, Australia.

Eva Heidhues

Lecturer, Macquarie University, Australia.

Some Theoretical and Methodological Suggestions

for Studies Examining Earnings Management and

Ethical Judgments in Accounting

Earnings management and ethical judgments both remain

important and controversial issues in accounting. However, previous

literature has some significant theoretical and methodological

weaknesses. The objective of this paper is to provide theoretical and

methodological suggestions to guide future research on ethical

judgments in the context of earnings management. One theoretical

weakness of prior literature is that it largely and repeatedly has focused

on the influence of Hofstede’s national cultural values on earnings

management. Particularly, prior research has largely neglected the

influence of personality variables on earnings management. Evidence,

primarily from the psychological literature, shows that personality

variables such as Construal of Self and Regulatory Focus Theory

influence behavior, cognition, goal pursuit, decisions and judgments.

As such, this paper suggests extending accounting research by

including personality variables that are likely to provide deeper and

sharper insight into earnings management and ethical judgments on

individual levels. A further theoretical weakness of prior literature is

that it largely focused on earnings management and ethical judgments

in Anglo‐American countries. Given the importance of contextual

factors such as political, economic and legal influences on ethical

judgments, the literature on earnings management and ethical

judgments is likely to be enhanced by considering different contextual

environments of countries. In particular it is suggested that future

research examining earnings management and ethical judgments focus

on countries in which ethics is an underexplored topic. Moreover, a

methodological weakness of prior research is its reliance on simplistic

unidimensional measures to evaluate accountants’ ethical judgments. It

is suggested that research measure ethical judgments by using a