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Meditari Accountancy Research
Hofstede’s cultural dimensions in accounting research: a review

Hichem Khlif
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Hichem Khlif , (2016),"Hofstede’s cultural dimensions in accounting research: a review", Meditari Accountancy Research,
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Hofstede’s cultural dimensions in accounting
research: a review
Absract:
Article type: Literature review
Purpose: This study reviews the use of Hofstede’s cultural dimensions in accounting research
over the period 1995-2015.
Design/methodology/approach: I combines electronic and manual searches to identify

relevant studies using key words like “national culture” or “Hofstede’s cultural dimensions”
and “accounting” or “auditing” or “taxation”. My search yields a total number of 35 published

studies. For each reviewed stream of research, I present its theoretical underpinning and
summarise its main results.
Findings: I identify four main accounting research topics being reporting policy, auditing,
taxation and miscellaneous accounting. These studies use three main methodologies including
empirical, experiment and meta-analysis. My review reveals that individualism is positively
related to corporate reporting policy, while it is associated with low levels of tax evasion.
High levels of masculinity are generally associated with low disclosure environments and
aggressive accounting manipulations. Finally, long-term orientation has been examined with
respect to social environmental disclosure and findings are supportive of a positive
association between both variables.
Originality/value: This literature review represents a historical record, an introduction and a

guidance for researchers who aim to examine whether Hofstede’s cultural dimensions may be
useful in explaining other accounting phenomena. It also presents the main critics addressed
to Hofstede’s framework. Finally, it conducts a critical analysis for reviewed studies and
highlights their reductionist approach in explaining accounting phenomena and
methodological weaknesses.
Key words: Hofstede’s cultural dimensions, accounting research
The author gratefully acknowledges the helpful comments and suggestions from the two
anonymous reviewers and the Editor-in-Chief, Charl de Villiers, of Meditari Accountancy
Research.
1
Hofstede’s cultural dimensions in accounting
research: a review
1. Introduction
National culture has long been recognised as a key environmental characteristic underlying
systematic differences in management behaviour (Steenkamp, 2000). Cultural norms and
beliefs are influential forces affecting people's perceptions, dispositions, and behaviours
(Markus and Kitayama, 1991). As such, accounting researchers have generally attempted to
integrate the cross-national differences in societal values (culture) in explaining management
behaviour and several accounting phenomena (e.g. reporting practices, earnings management,
social and environmental reporting) (Han et al., 2010; Hope, 2003). Since the Gray’s (1988)
conceptual framework which has demonstrated that Hofstede’s cultural dimensions may
affect accounting values (conservatism, transparency, uniformity), the use of national culture
in accounting research has been gaining momentum (e.g. Gray and Vint, 1995; Hussein, 1996;
Jaggi and Low, 2000; Kimbro, 2002; Doupnik and Richter, 2004; Ding et al., 2005; Doupnik
and Riccio, 2006; Tsakumis, 2007; Richardson, 2008; Hope et al. 2008; Chand et al. 2012;
Orij, 2010; Salter et al., 2013; Khlif et al. 2015).
According to Kirkman et al. (2006), the cultural classification of Geert Hofstede represents
the most influential national culture framework in business literature and it has inspired
thousands of empirical studies. In this regard, several literature reviews have been conducted
with respect to national culture and marketing research (e.g. Steenkamp, 2000; Soares et al.,
2006) and national culture and international business research (e.g. Kirkman et al., 2006).
However, a comprehensive review of the impact of Hofstede’s framework is lacking in
accounting field. Given the voluminous body of accounting research that uses Hofstede’s
cultural dimensions, I try in this study to review this accounting literature over the last twenty
2
years (1995-2015). To the best of my knowledge, this is the first review that tries to
summarise this field of research in accounting.
Based on a sample of 35 published studies, I identify four main streams of accounting
research using Hofstede’s cultural dimensions in explaining accounting phenomena including
(i) reporting policy, (ii) auditing, (iii) taxation and (iv) miscellaneous topics. Three main
methodologies are used including empirical, experiment and meta-analysis. Across studies,
topics examined generally deal with the effect of cultural dimensions on firm-level accounting
proxies (e.g. financial disclosure, social disclosure, discretionary accruals, auditor choice),
country-level data (e.g. tax evasion, the status of national GAAP compared to international
financial reporting standards), the association between corporate performance and social and
environmental disclosure. The mainstream of studies focuses on selected Hofstede’s cultural
dimensions1. Finally, a synthesis of empirical findings shows that (i) individualism is
positively associated with reporting policy, while it has a negative effect on tax evasion, (ii)
high masculinity level leads to low disclosure environments and aggressive accounting
manipulations (iii), uncertainty avoidance is associated with improved disclosure practices
and high tax evasion levels and (iv) long-term orientation is associated with high levels of
social and environmental disclosure.
This study makes contributions with respect to accounting researchers since it highlights the
main accounting topics examined in connection with national culture, different
methodological approaches used and suggests future research avenues in this regard. It also
discusses the main critics addressed to Hofstede’s cultural dimensions and provides a critical
analysis for reviewed studies.
The remainder of this paper is organised as follows. Section 2 defines Hofstede’s cultural
dimensions and presents the theoretical underpinnings for their effects in several accounting
1
Hofstede’s cultural dimensions include power distance, uncertainty avoidance, masculinity, individualism and long-term
orientation.
3
concepts. Section 3 presents the approach used to collect studies and analyses the historical
development of the use of Hofstede’s cultural dimensions in accounting research. Section 4
reviews the main accounting topics considering national culture as explanatory variables and
presents critics for these studies. Section 5 presents provides guidance for future research
avenues. Finally, section 6 concludes the paper.
2. Hofstede’s cultural dimensions and accounting
In this section, I define the concept of national culture and the five Hofstede’s cultural
dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term
orientation). Then, I explain the theoretical underpinnings suggesting that national culture
may affect reporting policy, tax evasion and auditing practices.
2.1. The concept of culture
Hofstede (1980: 25) defines culture as “the collective programming of the mind which
distinguishes the members of one human group from another”. National culture may influence
the psychological factors in decision-making (Salter et al., 2013), countries’ financial
reporting systems (Zarzeski, 1996), leadership concepts (House et al., 2004) and how
resources are allocated (Stulz and Williamson, 2003). Luthans et al. (1993) state that national
culture orientations influence leadership styles and the way of resources management. Orij
(2010, 873) considers that “national culture dimensions, as societal values, are reflected in
situational factors, which equate to the stakeholder salience attributes, and in management
characteristics”. Khlif et al. (2015) propose a conceptual framework suggesting that national
culture may play a critical role in shaping management behaviour and orientation with respect
to resources allocation and firm’s reporting policy. In this regard, Armstrong et al. (2010)
posit that accounting does not operate in a vacuum: it is ‘a product of its environment’.
Accordingly, culture represents an important factor in the environment and thus differences in
cultural values can have a significant impact on accounting and auditing practices.
4
Hofstede distinguishes between five cultural dimensions including power distance,
individualism versus collectivism, masculinity versus femininity, uncertainty avoidance and
long-term orientation2.
Power distance refers to the degree of equality or inequality between people in a country. A
high power distance score implies that inequalities of power and wealth are prevailing within
the country. Managers in countries characterised by high degrees of power distance have the
major corporate decision-making authority (Hofstede 2001) and are more likely to undertake
risky actions and manage earnings when the power is concentrated in their hands (Dechow,
Sloan, and Sweeney 1996).
Individualism refers to the degree to which a country supports individual or collective
achievements. A high score of individualism implies that individual rights are dominant in
one country. Managers operating in countries with high degrees of individualism are more
concerned with their own interests than shareholders’ wealth and stakeholders’ requirements
and they are more likely to manage earnings for the pursuit of self-interests (Zhang et al.,
2015).
Masculinity refers to the importance of sex (men versus women) in allocating social roles. A
low masculinity score indicates that one country attributes more importance to relationships,
modesty, caring for the weak, and the quality of life. In highly masculine societies, managers
attribute great importance to operating performance as sound corporate performance gives
them with more social recognition and personal esteem (Zhang et al., 2015).
Uncertainty avoidance focuses on the degree to which people tolerate uncertainty and
ambiguity in one country. A high uncertainty avoidance ranking implies that people in one
country do not tolerate a high degree of uncertainty and prefer more law institutions and
2
Secrecy represents another cultural dimension which is related to uncertainty avoidance, power distance and
individualism (Gray, 1988). Hope et al. (2008) compute secrecy as: Secrecy = uncertainty avoidance + power
distance – individualism.
5
regulations to reduce ambiguity. Managers, in settings with higher degrees of uncertainty
avoidance, are more risk averse and have more concerns about costs (Zhang et al., 2015).
Finally, long-term orientation refers to time dimension of decisions for one person. High long-
term orientation ranking implies that people in one country want to establish good
relationships with other stakeholders as a way to preserve strong ties with them in the future.
2.2. Critics addressed to Hofstede’s cultural dimensions
As stated above, Hofstede’s cultural framework remains one of the most easy ways to
integrate the concept of culture into academic research (e.g. accounting, marketing) in term of
time required to collect information, costs and availability of data (Soares et al., 2007).
However, several criticisms have been addressed to Hofstede’s approach.
Five main critics were addressed to Hofstede’s cultural dimensions that relate to (i) outdated
data, (ii) assumptions of ethnic homogeneity in one country, (iii) the close connection of
cultural dimensions with socio-economic data, (iv) IBM data is not representative for the
world and (v) the inapplicability of the five dimensions to all countries and cultures.
On the one hand, Orij (2010: 886) “Hofstede’s dimensions were identified and established
more than 30 years ago and there is no development over time with the dimension scores”.
This may make them outdated (Tsakumis et al. 2007). In this regard, Abdollahian et al. (2012)
suggest that, under the human development perspective, economic success acts as a vehicle
for cultural development, leading to more liberal social values. Accordingly, national culture
is strongly influenced by country economic development. This implies that Hofstede’s
cultural dimensions scores may experience some changes especially in developing countries
where the state of development has witnessed significant changes compared to 30 years ago
(Orij, 2010).
On the other hand, one of the major critics addressed to Hofstede’s cultural dimensions is the
equation of nation states with culture values, which represents heroic assumptions of ethnic
6
homogeneity in historical or political arrangements of societies (Baskerville, 2003).
Joannidès, Wickramasinghe and Berland (2012: 4) state that “By implicitly assuming that on a
given administrative territory (a country) all members of a nation are present, Hofstede
neglects multicultural countries (e.g. Belgium, Switzerland, Canada, USA, South Africa) as
well as cross-border cultures (e.g. Basques in France and Spain). This outlines that linguistic
nations can be located across administrative borders and do not always match with them”.
McSweeney (2002a) and Baskerville (2003) suggest that this approach makes culture concept
more obscure and disputable than it brings insights.
Baskerville (2003) suggests that the four dimensions (uncertainty avoidance, masculinity,
power distance and individualism) are embedded from social, political and economic
measures. For instance, uncertainty avoidance is connected with the average age of
respondents and it is linked to national death rate or accident statistics (Hofstede, 1980: 169).
Furthermore, masculinity/femininity reflects the percentage of professional and technical
females in the work force (Baskerville, 2003). In addition, power distance is closely related to
educational and occupational class indices and 58 per cent of power distance variance can be
deduced from national wealth, population size and latitude (Hofstede, 1980: 22). Finally,
individualism deals with sectorial inequality and it is linked to Gross National Product per
capita (Hofstede, 1980: 231). This implies that these dimensions relate more to socio-
economic data that reflect mechanisms of social organization, or strengths and opportunism of
different nations rather than national culture (Baskerville, 2003).
Fourth, McSweeney (2002a) suggest that the survey conducted among IBM employees does
not cover all countries. For instance, several countries are not yet included (e.g. Algeria,
Bolivia, Cuba, Tunisia). In addition, for some countries there has been a small number of
employees surveyed compared to other and in this may introduce a bias into homogeneity of
the population. For instance, McSweeney (2002a: 94) states that “In only six of the included
7
countries (Belgium, France, Great Britain, Germany, Japan and Sweden) were the numbers
of respondents more than 1000 in both surveys. In 15 countries (Chile, Columbia, Greece,
Hong Kong, Iran, Ireland, Israel, New Zealand, Pakistan, Peru, Philippines, Singapore,
Taiwan, Thailand and Turkey) the numbers were less than 200”. Baskerville (2003) adds that
IBM is characterised by a single, uniform and monopolistic organisational culture implying
that the focus on IBM organization is not the best way to determine national cultures
worldwide.
Finally, critics question the applicability of the dimensions to all cultures emphasising that
one can use other types of samples and provide other types of cultural scores for countries
(Schwartz, 1994; Soares et al., 2007)3.
2.3. Hofstede’s cultural dimensions and reporting policy
National culture may affect corporate reporting policy. In this regard, Gray (1988) posits that
there is a relationship between cultural dimensions and countries’ financial reporting systems.
More specifically, Gray (1988) distinguishes between four accounting values
(professionalism, uniformity, conservatism and secrecy) and suggests that they are closely
linked to and derived from Hofstede’s cultural values. In this regard, Gray (1988: 10 &11)
states that “The higher a country ranks in terms of uncertainty avoidance and the lower it
ranks in terms of individualism and masculinity then the more likely it is to rank highly in
terms of conservatism . The higher a country ranks in terms of uncertainty avoidance and
power distance and the lower it ranks in terms of individualism and masculinity then the more
likely it is to rank highly in terms of secrecy”. In this regard, International Financial Reporting
Standards (IFRS) strongly rely on the ‘substance-over-form’ concept with a strong reliance on
professional judgments which are influenced by accountants’ cultural values (Heidhues and
Patel, 2011). High masculinity environment will lead to higher risk taking behaviour and less
3
For instance, not all countries are included in the Hofstede’s Website (http://geerthofstede.com/countries.html)
such as Algeria, Oman, Paraguay, Tunisia, Zimbabwe. In addition, long term-orientation dimension is not
available for all countries studied by Hofstede such as Kuwait and the United Arab Emirates.
8
conservative financial reporting (Kanagaretnam et al., 2014) implying more professional
judgements’ activities and less neutral behavior. Accordingly, masculinity may also play a
critical role in shaping country’s accounting system (e.g. IFRS adoption).
Aside from the effect of national culture on shaping countries’ national accounting systems,
Hofstede’s cultural dimensions have been also hypothesised to influence financial reporting
policy (Hope, 2003; Jaggi, 1975; Jaggi and Low, 2000), social and environmental disclosure
(Orij, 2010; Khlif et al. 2015) and earnings management practices (Han et al., 2010).
Jaggi (1975) posits that the cultural environment of a country may have a strong impact on
financial reporting practices by firms. In his model, Gray (1988) suggests that the degree of
secrecy may be influenced by cultural values. Secrecy is defined by Gray (1988: 8) as a
“preference for confidentiality and the restriction of disclosure of information about the
business only to those who are closely involved with its management and financing as
opposed to a more transparent, open and publicly accountable approach”. The secrecy
hypothesis posits that uncertainty avoidance, power distance, individualism and masculinity
dimensions may influence the degree of transparency among firms’ managers which in turn
affect financial disclosure practices (Gray, 1988; Gray and Vint, 1995; Tsakumis, 2007).
With respect to social and environmental reporting practices, the association between such
type of disclosure and national culture is based on the reasoning that dissimilarities exist
between stakeholders’ orientation of countries (Orij, 2010). For instance, Van der Laan Smith
et al. (2005: 132) posit that: “In a society concerned with social issues, we argue that...
stakeholder groups have more power, possess greater legitimacy, and have their claims
viewed with greater urgency”. Ringov and Zollo (2007, 467) suggest that the concept of
social responsibility is mainly influenced by national culture implying that stakeholders’
orientations in one society may exert pressures on business and push them to engage in social
and environmental acts. Khlif et al. (2015) develop a conceptual framework suggesting that
9
national culture is a decisive factor in shaping management behaviour concerning financial
resources allocations, which in turn affect social and environmental responsibility and thus
corporate reporting practices in this regard.
Finally, earnings management practices can be linked also to national culture since Gray’s
model (1988) suggests that culture dimensions may influence the degree of accounting
conservatism (income increasing, loss recognition or income decreasing). In the same vein,
Han et al. (2010: 126) “Hofstede culture dimensions probably have the most straightforward
implications for managers’ accounting choice behaviors”. More specifically, they posit that in
uncertainty-avoidant settings, rules would support a conservative approach to earnings
management, while accountants within an individualistic society will have more incentives to
choose the most optimistic numbers allowed by institutions which serve their own interests.
2.4. Hofstede’s cultural dimensions and auditing
National culture has been hypothesised to influence auditor choice and the magnitude of
accounting errors4 (Chan et al., 2003; Hope et al., 2008). On the one hand, culture may affect
managerial decision with respect to auditor choice (Big-4 versus non-Big-4 auditors) based on
secrecy hypothesis. For auditors, operating in secretive environment will increase audit risk
since clients’ secretive culture increases the likelihood of withholding material information to
perform audit mission (Hope et al., 2008). Accordingly, high-quality auditors will be more
reluctant to accept audit engagement in countries characterised by high secretive culture.
On the other hand, national culture is closely linked to the accounting subcultures, particularly
professionalism and uniformity (Gray, 1988). These two accounting sub-cultures are strongly
related to the enforcement of accounting systems and have implications for the effectiveness
of internal control systems and other factors contributing to the occurrence of accounting
errors (Chan et al., 2003). For instance, high power distance companies are generally
4
Auditors are ultimately concerned with the magnitude of accounting errors when expressing an audit opinion.
10
characterised by uneducated workers and employees implying less commitments towards
transparency leading to more internal control weaknesses which have implications for the
existence of accounting errors. In this regard, Hofstede (2001) adds that financial statements
are often used by top management to justify their decisions and preserve the desired image.
Thus, the likelihood of overriding existing controls increases in companies characterised by
high power distance leading to more risks of material accounting errors (Chan et al., 2003). In
the same vein, in individualist companies, employees may emphasise on short-term

opportunistic attitude toward their jobs leading to low employee loyalty and thus higher
personnel turnover. Numerous changes of personnel, specifically top accounting personnel,
imply less familiarity with firm’s business practices and regulations during the change over
period (Kreutzfeldt and Wallace 1986). Such an individualist environment will increase the
likelihood of error occurrence due to the lack of competent employees and their short-term
opportunistic attitude. Furthermore, management, in individualist companies, places more
reliance on accounting numbers for performance evaluation leading to aggressive earnings
management (Hofstede 2001; Chan et al., 2010).
2.5. Hofstede’s cultural dimensions and taxation
National culture has been hypothesised to play an important role in explaining countries’ tax
evasion behaviour (Tsakumisa et al., 2007; Richardson, 2008). First, high power distance
environments are characterised by inequalities of power and wealth and power holders will
have special privileges (Hofstede, 1980). Accordingly, tax system will be unfair among all
citizens in such settings implying less compliance with tax rules and thus higher tax evasion
levels. Second, individualist societies are generally characterised by rules and procedures
applied universally to all citizens to ensure equity (Trompenaars and Hampden-Turner, 1998).
This implies that tax system will be equitable and fair to increase tax compliance because tax
rules are applied in a similar way to all citizens (Richardson, 2008). Third, tax rules in
11
uncertainty avoidance settings tend to be complex since there is a need for many written tax
rules to reduce uncertainty and ambiguity (Richardson, 2008). This fiscal rules complexity
may reduce tax compliance among citizens. In this regard, Tsakumisa et al. (2007) add that
individuals in high uncertainty avoidance countries often view legal systems as “unjust” rules
that are not applied universally to all citizens which means that tax evasion will act as a tool
to reduce uncertainty and ambiguity. Finally, masculine culture society strives for a material
performance with more emphasis on the pursuit of material success in an “unjust world”
(Hofstede, 2001), while feminine settings strive for the protection of nurturing values, and
generally consider the world as a “just” place that should ensure a minimum quality of life
(Richardson, 2008; Tsakumisa et al., 2007). This implies that the high degree of masculinity
in one country will lead to low tax compliance and thus high tax evasion.
3. Literature search and trend in the use of Hofstede’s cultural dimensions

in accounting research
The studies included in this review are identified by systematic process which combines
electronic and manual research. Combination of key words used to search for relevant studies
include “national culture” or “Hofstede’s cultural dimensions” and “accounting” or “auditing”
or “taxation”. I consult editorial sources including AAA, Elsevier, EJS Ebsco, Emerald,
Springer, Palgrave macmillan, Sage, Taylor & Francis, Wiley-Blackwell. I also conduct a
manual search by tracking down references in collected studies to identify the maximum
number of published papers. My search yields a total number of 35 published studies over the
period 1995-2015. Table 1 lists these papers by journal and year of publication.
Insert Table 1 about here
As shown in table 1, the identified articles come from (i) accounting journals including The
International Journal of Accounting with 4 published papers, Asia-Pacific Journal of
Accounting & Economics, Journal of International Accounting Research with 3 published
studies and Abacus, Accounting Review, Journal of International Accounting, Auditing and
12
Taxation with 2 published papers for each journal, (ii) business journals including Journal of
International Business Studies with 4 published studies and (iii) finance journals such as
Journal of Corporate Finance and Journal of Banking & Finance with 1 published study for
each journal.
As shown in table 1 and figure 1, the majority of studies using Hofstede’s cultural dimensions
in accounting research has been published during the last decade with 28 (28/35 = 80 per
cent) studies published since 2005. The peak periods are 2008, 2010, 2013 and 2015 with 4
published studies followed by 2005 and 2007 with 3 papers each year. This trend suggests
that the use of Hofstede’s cultural dimensions in accounting research has been gaining
momentum during the last decade. One plausible explanation for this trend is that Hofstede’s
cultural dimensions remains one of the most influential cultural classifications and an easy
way to examine the concept of culture in term of time required and costs to conduct research
and the availability of data5 (Kirkman et al., 2006; Soares et al., 2007). For instance, Soares et
al. (2007: 283) suggest “culture is a fuzzy concept raising definitional, conceptual, and
operational obstacles for research”. They add (2007: 283) that “Hofstede’s framework
constitutes a simple, practical, and usable shortcut to the integration of culture into studies”.
Insert figure 1 about here
4. Review of studies
In this section, I try to review the accounting literature using Hofstede’s cultural dimensions.
I identify 35 studies dealing with reporting policy, auditing, taxation and miscellaneous topics
in accounting.
4.1. Reporting policy
5
Data concerning power distance, individualism, masculinity, uncertainty avoidance and long-term orientation
scores for countries examined are freely accessible at (http://geerthofstede.com/countries.html).
13
Reviewed studies deal with the effect of Hofstede’s cultural dimensions on countries’
reporting systems, financial reporting policy, accountants’ interpretation of accounting
standards, earnings management and social and environmental disclosure.
On the one hand, Ding et al. (2005) examine the effect of four cultural dimensions (power
distance, individualism, uncertainty avoidance and masculinity) on differences between
national GAAP and International Accounting Standards (IAS) in terms of divergence6 and
absence7 scores. Based on a sample of 52 countries, they document that individualism and
uncertainty avoidance are positively associated with the divergence of local GAAP with IAS,
while uncertainty avoidance is positively related to the absence of local GAAP with IAS.
On the other hand, Gray and Vint (1995) examine the relationship between national culture
and accounting disclosures for a sample 27 countries. Disclosure practices were measured
using a survey of accounting requirements and practices in 27 countries conducted by the
local partners in each of Deloitte's national offices. Results show that uncertainty avoidance
and individualism exert a significant positive effect on disclosure practices compared to
power distance and masculinity. Hussein (1996) investigates the association between
Hofstede’s cultural dimensions and financial reporting in a comparative study for firms from
the USA and the Netherlands. Findings show that disclosure of social, environmental and
labour issues are significantly higher for Dutch companies compared to American ones since
there is a significant difference between the two countries in the masculine/feminine
dimension (i.e. USA has a score of 64 for masculinity, whereas the Netherlands has a score of
14). Zarzeski (1996) examines the association between national culture and accounting
disclosure practices for sample of 256 annual reports from France, Germany, Hong Kong,
Japan, Norway, the United Kingdom and the United States. Findings show that individualism
and masculinity are positively related to disclosure, while uncertainty avoidance is negatively
6
National GAAP and IAS cover specific accounting topics but describe different methods.
7
National GAAP do not cover accounting issues treated by IAS.
14
related. Power distance is not significantly associated with disclosure. Jaggi and Low (2000)
examine the same relationship for a sample of 505 firms from 28 civil and common law
countries. Results for the overall sample indicate that power distance and individualism have
a significant positive effect on financial disclosure practices, while masculinity is negatively
associated with financial reporting. When dividing the overall sample into common versus
civil law countries, the previous findings become insignificant for common law group. For
civil law countries, power distance and individualism remain positively and significantly
associated with financial disclosure practices, while masculinity is negatively related to
financial reporting. In addition, uncertainty avoidance becomes a significant predictor of
higher levels of financial disclosure in civil law countries. In the same vein, Hope (2003)
investigates the effect of cultural dimensions on firm-level disclosures for a sample 1,851
observations from 39 countries from civil and common law countries. For the overall sample,
he documents that, in general, individualism (masculinity) has a significant positive (negative)
effect on firm-disclosure level. When examining the effect of legal system on such a
relationship, he provides evidence that individualism and uncertainty avoidance (masculinity)
have (has) a significant positive (negative) effect on firm-disclosure level in civil law
countries. By contrast, for common law settings, individualism, power distance and
uncertainty avoidance are negatively associated with firm-disclosure level, while masculinity
is positively related to the same variable. Garcia-Sanchez et al. (2013) explore the effect of
national culture on integrated reporting (information dealing with financial performance,
management, corporate governance and sustainability record) for sample of 1,590 largest
companies worldwide over the period 2008-2010. They document that only collectivism and
feminism cultural values8 have a significant positive effect on integrated reporting, while
8
Cultural values are dummy variables that take 1 if company is located in a country with collectivist or feminist
orientation (the country’s score is inferior to median of masculinity or individualism) and 0 otherwise.
15
uncertainty avoidance, power distance and long-term orientation are not significantly
associated with the same variable.
With regard to accountants’ perceptions and interpretation of accounting standards, Schultz
and Lopez (2001) investigate the judgments made by accountants when determining
accounting estimates concerning warranty expenses in France, Germany, and the United
States which have different levels of uncertainty avoidance scores accounting for 86, 65 and
46 respectively. The results show that warranty expenses and their corresponding liabilities
recorded are higher for French accountants compared to German professionals. American
accountants exhibit less risk aversion since warranty expenses are lower compared to French
and German accountants. Doupnik and Richter (2004) and Doupnik and Riccio (2006)
conduct a comparative study between the USA and Germany and the USA and Brazil,
respectively, using a survey methodology. Doupnik and Richter (2004) document that
Brazilian accountants seem to adopt a more conservative approach in recognising elements
that increase income compared to US accountants. In the same vein, Doupnik and Riccio
(2006) provide evidence that, in most cases, the German accountants appear to be more
conservative since they exhibit a conservative bias in their interpretation of the word
“probable”9 commonly used in several IFRS standards. Similarly, Tsakumis (2007) conducts
an experiment to examine the effect of national culture on accountants’ recognition and
disclosure decisions for contingent assets and liabilities in a comparative study between the
USA and Greece. Results show that no differences are identified between Greek and U.S.
accountants’ recognition decisions involving both contingent assets and liabilities. By
contrast, additional analyses suggest that U.S. accountants exhibit more conservatism than
Greek accountants, while they are less likely to disclose information than their US
counterparts. More recently, Chand et al. (2012) test whether national culture influences
9
For example in IAS 18 « revenues from sales of goods should be recognized when it is probable that the
economic benefits associated with the transactions will flow to the entreprise »
16
student interpretation and application of uncertainty expressions related to the recognition of
assets and liabilities and disclosure in IFRS. The survey was conducted on sample of
Australian (39) and Chinese students (229). Findings show that Chinese students exhibit
greater conservatism and secrecy compared to Australian students.
With respect to discretionary accruals, Guan et al. (2005) examine the effect of national
culture (individualism, power distance, uncertainty avoidance and long-term orientation) on
earnings management or choices of accounting accruals in five Asia-Pacific countries:

Australia, Japan, Hong Kong, Malaysia and Singapore. They find that individualism has a
significant positive effect on earnings management, while uncertainty avoidance and long-
term orientation have a significant negative effect on the same variable. Nabar and Boonlert-
U-Thai (2007) examine the effect of national culture (uncertainty avoidance, power distance,
masculinity and individualism) on earnings management for a sample of 30 countries.
Findings show that earnings management is relatively high in countries with high uncertainty
avoidance scores. In the same vein, Doupnik (2008) investigate the relationship between
cultural values and earnings management. The latter is measured using four measures
provided in Leuz et al. (2003) dealing with earnings smoothing and earnings discretion. Based
on sample of 31 countries, they document that uncertainty avoidance is positively associated
with earnings management, while individualism has a negative effect on the same variable.
For the remaining cultural dimensions (masculinity, power distance, long-term orientation),
the relationship with earnings management is not significant. In the same vein, Han et al.
(2010) examine the same topic using firm-level data of discretionary accruals. Based on a
sample of 96,409 firm–year observations (18,609 distinct firms) for the period from 1992 to
2003 in 32 countries, they document that the absolute values of discretionary accruals are
positively (negatively) related to individualism and masculinity (uncertainty avoidance). By
contrast, power distance does not have a significant impact on discretionary accruals. These
17
results remain stable when distinguishing between firms adopting conservative (negative
discretionary accruals) or aggressive (positive discretionary accruals) accounting policies.
Similarly, Guana and Pourjalalia (2010) examine the effect of cultural values on earnings
management in 27 countries. They document that uncertainty avoidance also affects the
direction of earnings management downwards. Other cultural values, such as individualism,
power distance, and masculinity, exert a significant positive effect on the magnitude of
earnings management. Geiger and van der Laan Smith (2010) examine the effect of secrecy
score on the perceptions of earnings management for a sample of 1,260 participants from 13
countries. They document that secretive cultures were more accepting of earnings
management activities. Kanagaretnam et al. (2011) examine the same research question for
financial institutions based on a sample of banks from 39 countries on the pre-financial crisis
period 1993–2006. They provide evidence that banks in high individualism, high masculinity,
and low uncertainty avoidance societies manipulate earnings to just-meet-or-beat the prior
year's earnings. In tests of income smoothing through loan loss provisions, they provide
evidence that banks in high individualism, high power distance, and low uncertainty
avoidance societies report smoother earnings. Kanagaretnam et al. (2014) also test whether
national culture affects accounting conservatism in banking industry for a sample of
international banks from for 70 countries over the (pre-crisis) period 2000-2006. They
document that individualism is negatively related to conservatism and uncertainty avoidance
is positively related. More recently, Gray et al. (2015) examine also this question for
companies located in the European community (14 countries) during the period 2000-2010.
They focus on two cultural dimensions namely, individualism and uncertainty avoidance.
Findings, for the entire period (2000-2010), show that individualism has a significant positive
effect on earnings management, while power distance is not significantly associated with this
18
variable. For the post IFRS adoption period (2005-2010), the results remain stable for
individualism, while they become negative and significant for uncertainty avoidance.
Finally, two papers have dealt with national culture and social and environmental disclosure.
Orij (2010) examines the effect Hofstede’s cultural dimensions (power distance, uncertainty
avoidance, masculinity, individualism and long-term orientation) on social disclosure for a
sample 600 large companies from 22 countries. He documents that individualism and long-
term orientation (power distance) are (is) positively (negatively) associated with social
disclosures. Khlif et al. (2015) meta-analyse the association between corporate profitability
and social and environmental disclosure by exploring the moderating effect of three cultural
dimensions (individualism, masculinity and long-term orientation) on such a relationship.
Based on a meta-analytic sample of 42 empirical studies between 1975 and 2013, they
document that the positive and significant relationship between social and environmental
disclosure and profitability is moderated by masculinity, individualism and long-term
orientation. For instance, in settings characterised by low (high) individualism, low (high)
masculinity and high (low) long-term orientation, there is a significant (non-significant)
positive association between corporate profitability and social and environmental information.
4.2. Auditing
I identify two empirical studies dealing with the effect of Hofstede’s cultural dimensions on
auditing through the magnitude of accounting errors and auditor choice. Chan et al. (2003)
examine the effect of two cultural dimensions (power distance, individualism) on audit-
detected accounting errors in accounts receivable, accounts payable and inventories. Based on
a sample of 80 firms from 22 countries, they document that power distance and individualism
are positively related to audit-detected accounting errors in accounts receivable, accounts
payable, while they do not have a significant effect on errors related to inventories. Hope et al.
(2008) investigate the association between secrecy (uncertainty avoidance + power distance –
19
individualism) and auditor choice (Big-4 versus local audit firms). Their sample consists of
91,030 firm-year observations (16,334 distinct firms) from 37 countries over the period 1992-
2004. They document that the high level of secrecy is negatively associated with the
likelihood of choosing Big-4 auditors. They further examine whether the degree of firm’s
internationalization affects such a relationship. Using an interaction variable between secrecy
and the degree of internationalization, they document this interaction term has a positive
effect on auditor choice. This implies that the negative effect of home secrecy on choosing
Big-4 auditor is mitigated by the extent to which firm is involved in foreign operations.
4.3. Taxation
I identify two empirical studies examining the effect of Hofstede’s cultural dimensions on tax
evasion. Tsakumis et al. (2007) explore the effect of four cultural dimensions (uncertainty
avoidance, power distance, masculinity and individualism) on tax evasion for a sample 50
countries. Tax evasion is proxied by a macro-indirect approach based on Schneider (2004).
They provide evidence that uncertainty avoidance and power distance have a significant
positive effect on tax evasion, while masculinity and individualism are negatively associated
with the same variable. In the same vein, Richardson (2008) extends this research question by
focusing on a sample of 47 countries. He uses three proxies for tax evasion based on country
survey ratings of individuals’ perceptions about the under-reporting of income. Findings show
that only uncertainty avoidance has a significant positive effect on tax evasion, while
individualism is negatively associated with the same variable.
4.4. Miscellaneous10
I identify eight empirical studies focusing on the effect of Hofstede’s cultural dimensions on
corruption, corporate social and environmental responsibility performance, analyst target
10
In miscellaneous, topics dealing with the effect of national culture on dividend policy, cost of equity capital
and financial systems are not reviewed since they are more linked to finance.
20
price accuracy, escalation of commitment, firm’s investment, investment efficiency and cash
holdings.
Kimbro (2002) examine the effect of individualism and power distance on the level of
corruption for sample of 61 countries. She documents that the level of corruption is an
increasing function of these two cultural dimensions. In the same vein, Mihret (2014)
investigates the effect of national culture (uncertainty avoidance, masculinity, individualism,
power distance, long-term orientation) on fraud risk, as proxied by corruption index, for a
sample of 66 countries. He provides evidence that power distance and uncertainty avoidance
have a positive effect on fraud risk, long-term orientation is negatively associated with the
same variable.
Ringov and Zollo (2007) investigate the association between Hofstede’s cultural dimensions
(power distance, masculinity, uncertainty avoidance and individualism) and social and
environmental performance for a sample 463 firms from 23 North American, European and
Asian countries. They document that power distance and masculinity have a significant
negative effect social and environmental performance, while neither individualism nor
masculinity is significantly associated with the same variable.
Bilinski et al. (2012) examine the effect of Hofstede’s cultural dimensions (power distance,
masculinity, uncertainty avoidance and individualism) on analyst target price accuracy for a
sample of 585,718 target price estimates from 16 countries. They document that power
distance, masculinity and individualism have a significant negative effect on analyst target
price accuracy, while uncertainty avoidance is positively associated with the same variable.
Salter et al. (2013) investigate the relationship between two Hofstede’s cultural dimensions
(individualism, uncertainty avoidance and long term orientation) and escalation of
commitment as measured by the probability of investing additional resources. Based on a
sample 1,134 MBA students surveyed from 9 countries, they provide evidence that only
21
individualism and long term orientation have a significant negative effect on escalation of
commitment, whereas uncertainty avoidance is not significantly related to the same variable.
Li et al. (2013) examine the effect of cultural dimensions (individualism, uncertainty
avoidance) on risk-taking measures (standard deviation of return on assets (STDROA) and
investments on research and development R&D). They document that individualism has a
positive effect on both risk-taking measures, while uncertainty avoidance is negatively
associated with the same measures. In the same vein, Shao et al. (2013) investigate whether
individualism has an effect R&D for a sample of 68,329 firm years from 44 countries over the
period 1991-2010. They document that firms in individualistic settings invest more in long-
term (risky) than in short-term (safe) assets. Furthermore, individualism is associated with
more (less) investment in R&D (physical assets).
Zhang et al. (2015) test whether national culture (power distance, uncertainty avoidance,
individualism, and masculinity) has an effect on firm investment efficiency using data of
listed companies from 18 countries. Investment efficiency is based on the residuals from
Richardson’s (2006) model commonly called investment bias. Findings show that
individualism is positively associated with firm investment bias and that uncertainty
avoidance and masculinity are negatively related to firm investment bias. These relationships
are more pronounced during the financial crisis of 2008.
Finally, Chen et al. (2015) investigate whether the association between national culture and
cash holdings for a sample of 27,801 firms from 41 countries. Results show that individualism
is negatively associated with cash holdings, while uncertainty avoidance is positively related
to cash holdings in companies. Furthermore, individualism is positively correlated with
firm’s capital expenditures, acquisition and repurchase, while uncertainty avoidance is
negatively associated.
4.5. Summary
22
Overall, the empirical review of the use of Hofstede’s cultural dimensions in accounting
research reveals that the majority of studies has been conducted in financial accounting field
(22) with few empirical enquiries dealing with auditing (2) taxation (2). The remaining
studies examine miscellaneous accounting topics (9). Three main methodologies were used
including empirical (28), experiment (6) and meta-analysis (1). Across studies, authors have
tested the effect of cultural dimensions on firm-level accounting proxies (e.g. financial
disclosure, social disclosure, discretionary accruals, auditor choice), country-level data (e.g.
tax evasion, the status of national GAAP compared to international financial reporting
standards) and the association between corporate performance and social and environmental
disclosure. Some studies have examined the interaction between national culture and IFRS
adoption (e.g. Gray et al., 2015), legal system (Hope, 2003), degree of internationalization
(Hope et al., 2008).
The majority of studies does not include all cultural dimensions and selects some of them
depending on their research topic. Some empirical studies focus on the composite cultural
dimension named secrecy (e.g. Hope et al., 2008; Geiger and van der Laan Smith, 2010).
Three empirical enquiries focus on the five cultural dimensions (power distance, masculinity,
individualism, uncertainty avoidance and long term orientation) including Doupnik (2008),
Orij (2010), Garcia-Sanchez et al. (2013) and Mihret (2014).
The main part of the reviewed studies represents an empirical cross-country investigation and
only five studies represent comparative works between France, Germany, and the United
States (Schultz and Lopez, 2001), USA and Germany (Doupnik and Richter, 2004) and, USA
and Netherlands (Hussein, 1996),USA and Brazil (Doupnik and Riccio, 2006) and USA and
Greece (Tsakumis, 2007).
Regarding the findings of reviewed studies, results show that individualism has generally a
significant positive effect corporate reporting policy, while it is associated with low levels of
23
tax evasion. High levels of masculinity are generally related to low disclosure environments
and aggressive accounting manipulations. Uncertainty avoidance is linked to improved
disclosure practices and high tax evasion level. Results concerning power distance are
generally mixed. Finally, long-term orientation has been examined with respect to social
environmental disclosure and findings are supportive of a positive association between both
variables.
Insert Table 2 about here

4.6. A critical analysis
The results of the reviewed studies are impactful. However, questions about cultural
differences and their effect on accounting phenomena remain. In many accounting research
areas such as tax evasion, firm disclosure policy, earnings management, Hofstede-inspired
research seems to be fragmented, redundant, and overly reliant on the same levels of analysis.
A critical analysis of the reviewed studies may reveal the existence of a reductionist approach
when making the assumption that several accounting phenomena are simply explained by
national culture as proxied Hofstede’s cultural dimensions. In addition, some cross-cultural
studies may suffer from methodological weaknesses.
On the one hand, Gernon and Wallace (1995) posit that the application of Hofstede’s cultural
dimensions in international accounting research represents « a paradigm myopia ». In this
regard, Heidhues and Patel (2011) suggest that « cross-cultural accounting research seems to
be in danger to rely on overgeneralisations of categorizations and cultural dimensions that
often fail to capture the complexity and dynamics of cultures » and that « accounting
research is a social and dynamic discipline that requires ontological and epistemological
openness and multiple discourses in its debates rather than being marginalized to
categorizations, dimensions and clusters » (p. 283). For instance, large body of research
argues that the tension between accountability and neoliberalism is at the heart of much of the
24
development of standards (Ravenscroft and Williams, 2009) and thus Hofstede’s cultural
dimensions may play a limited role in explaining the convergence process towards IFRS. In
addition, legal charateristics (e.g. legal enforcement) (Garcia-Meca and Sanchez-Ballesta,
2010), corporate governance mechanisms (Samaha et al., 2015), the development of equity
markets (Khlif et al., 2016) may play an important role in shaping reporting policy and
earnings management practices (Leuz et al., 2003). This may lead to over-reaching
conclusions with regard to the effect of culture on reporting policy (e.g. financial disclosure,
integrating reporting and earning quality). For social and environmental disclosure, country
orientation (stakeholders versus shareholders) may represent a critical factor that determines
whether stakeholders have power to put pressures on management to undertake and
communicate social and environmental information (Coetzee and Van Staden, 2011).
Furthermore, restricting the analysis to auditor choice, as a proxy for audit quality, may be
critical since this concept may include other important components such as audit fees (auditor
effort), audit report lag (auditor efficiency) and auditor opinion (auditor independence)
(Francis, 2004). Similarly, other factors beyond national culture may be more relevant in
explaining audit-detected accounting errors such as professional judgement and the propensity
of auditors to whistle-blowing which is influenced by level of distributive, interactional and
procedural justice (Soni et al., 2016).
On the other hand, some studies have ignored methodoligcal issues when conducted their
analyses. For instance, cross-cultual reporting quality studies do not take into account
differences in regional accounting practices, the impact of IFRS conversion and the change of
accounting standards over time. These technical developments could be obscuring the
relationship between dependent and independent variables and call into question the extent to
which these studies confirm the relevance of cultural variation (Maroun, 2015). The same
critics can be adressed to tax evasion cross-cultural studies since they consider countries with
25
different fiscal systems that generally witness signficant changes (e.g. tax rates, introduction
of value added tax) over time and this may introduce a bias into the empirical analysis.
Auditing studies also suffer from methodological issues. For instance, Hope et al. (2008)
focus on a sample of companies from 37 countries over the period 1992-2004. Such period
includes significant changes in national and international audit environment (e.g. the failure of
audit firms, the adoption of Sarbnes Oxly Act, audit market11) which may have an impact on
auditor choice. Finally, Hofstede’s cultural variables are measured at the country level while
dependent variables in the main part of reviewed studies rely on company- or accountants-
level analysis and this may also introduce a bias into analysis (Kanagaretnam et al., 2014).
5. Future research perspectives
Several topics remain unexplored with respect to national culture and accounting research.
For instance, future research may focus on the effect of Hofstede’s cultural dimensions on
management earning forecast accuracy since national culture has been shown to influence
corporate reporting policy and management behaviour. It is also relevant to examine how
national culture may affect the choice between fair value approach or cost method for
countries adopting IFRS. Besides, future empirical enquiries may examine the effect of
national culture on tax avoidance since the latter is closely linked to tax evasion. In addition,
Hofstede’s cultural dimensions may also affect corporate reporting policy through audit report
lag and the tardy communication of information and uncertainty avoidance, as an example,
may represent a key factor in influencing timely disclosure in one setting. Furthermore,
individualism, masculinity may affect the level of family ownership and ownership
concentration across countries. Thus, future empirical investigations may examine such a
topic. Finally, future meta-analytic accounting research should consider the moderating
11
The Big 6 from 1989–1997, Big 5 from 1998 to 2001, and the Big 4 since the collapse of Arthur Andersen in
2002 (Francis, 2004).
26
effects of national culture when synthesising the empirical findings of studies dealing with
accounting topics as recommended by Khlif and Chalmers (2015).
However, given the criticisms to Hofstede’s framework, accounting researchers have to look
beyond this paradigm to break new ground with regard to cross-cultural enquiries. It should
be noted here that recent trends in accounting research rely on individual’s facial features, as a
biological marker of masculine behaviour, that may be used to proxy for individual’s
masculinity (Jia et al., 2014). Such approach requires the use of manager’s picture (e.g. CEO)
to compute facial structure metric named the facial width-to-height ratio (fWHR) which is the
distance between cheekbones and the height of the upper face (Jia et al., 2014). This new
approach applied by Jia et al (2014) based on fWHR to proxy for masculinity represents one
interesting alternative. Therefore, future research may consider such new proxy for
masculinity and examine whether it has an effect on disclosure policy (e.g. timely disclosure,
management earning’s forecast accuracy) and tax avoidance.
6. Conclusion
In this paper, I review the use of Hofstede’s cultural dimensions in accounting research. I
identify 35 studies published since 1995. I find that the majority of studies has been
conducted in reporting policy field (22) with few empirical studies dealing with auditing (2),
taxation (2) and other miscellaneous accounting topics (9). Three main methodologies were
used including empirical (29), experiment (5) and meta-analysis (1). Authors have
investigated the effect of cultural dimensions on firm-level accounting proxies (e.g. financial
disclosure, social disclosure, discretionary accruals, auditor choice), country-level data (e.g.
tax evasion, the status of national GAAP compared to international financial reporting
standards) and the relationship between corporate performance and social and environmental
disclosure.
27
The mainstream of the reviewed studies does not include all Hofstede’s cultural values and
selects some of them depending on their research topic, while others emphasis on secrecy
(e.g. Hope et al. 2008). Only three empirical studies include the five cultural dimensions
(power distance, masculinity, individualism, uncertainty avoidance and long-term orientation)
in their empirical analyses. The main part of the reviewed papers represents an empirical
cross-country investigation and only five studies conduct a comparative analysis between two
or three countries.
Concerning the empirical findings of the reviewed studies, results show that individualism has
generally a significant positive effect on corporate reporting policy, while it has a significant
negative effect on tax evasion. High levels of masculinity are generally related to low
disclosure environments and aggressive accounting manipulations. Finally, long-term
orientation has been investigated in connection with social environmental disclosure and
empirical findings suggest that such a cultural dimension is associated with increased social
and environmental reporting practices.
My intent is that this paper will impact future accounting research using Hofstede’s cultural
dimensions in four ways. First, the description of the wide range of approaches used and the
different topics examined will familiarise established and aspiring researchers with the use of
Hofstede’s cultural values as they represent a simple, practical, and usable tool to integrate
the concept of national culture in explaining accounting phenomena. Second, providing a
summary of the main findings of the use of Hofstede’s cultural values in accounting research
is an important first step to underscore the main contributions of these studies with respect to
managers of multinational companies and regulators. The reviewed studies demonstrate that
Hofstede’s cultural values are gradually being applied to answer more complex questions and
explain more deep-seated phenomena requiring more sophistication in accounting and
auditing and tax fields. Third, the paper provides guidance for the future use of Hofstede’s
28
cultural dimensions in accounting research with respect to management earnings forecasts, tax
avoidance, audit report lag and the tardy communication of information and the level of
family ownership across countries. Fourth, it summarises the critics addressed Hofstede’s
framework and presents recent alternative used in accounting research to proxy for cultural
dimensions. Finally, it provides a critical framework for the reviewed studies to alert
accounting researchers that national culture can only provide limited insights into explaining
accounting phenomena and highlight the methodological weaknesses of such stream of

international accounting research.
29
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34
Table. 1 Count of published reviewed studies
Panel A: By Journal Number
Abacus 2
Advances in Accounting Incorporating Advances in International Accounting 1
Accounting, Auditing & Accountability Journal 1
Accounting Horizons 1
Asia-Pacific Journal of Accounting & Economics 3
Auditing: A Journal of Practice & Theory 1
Corporate Governance 1
European Accounting Review 1
International Business Review 1
Journal of Banking & Finance 1
Journal of Corporate Finance 1
Journal of Accounting, Auditing and Finance 1
Journal of Accounting and Public Policy 1
Journal of Financial Reporting and Accounting 1
Journal of International Accounting, Auditing and Taxation 2
Journal of International Accounting Research 3
Journal of International Financial Management and Accounting 1
Journal of International Business Studies 4
Meditari Accountancy Research 1

Multinational Business Review 1
The Accounting Review 2
The International Journal of Accounting 4
Total 35
Panel B: by year Number
1995 1
1996 1
1997-1999 0
2000 1
2001 1
2002 1
2003 1
2004 1
2005 3
2006 1
2007 4
2008 3
2009 0
2010 4
2011 1
2012 2
2013 4
2014 2
2015 4
Total 35
35
Figure 1. Trends of the use of Hofstede’s cultural dimensions in accounting
research between 1995 to 2015
36
Table 2. Summary of reviewed studies

Authors Research question Sample Methodology Main findings
Reporting policy- National accounting system
Ding et al. (2005) Whether national culture has an 52 countries Empirical Individualism and uncertainty avoidance are positively associated with the
effect on differences between divergence of local GAAP with IAS, while uncertainty avoidance is positively
national GAAP and related to the absence of local GAAP with IAS.
International Accounting
Standards (IAS) in terms of
divergence and absence.
Reporting policy- firm disclosure practices
Gray and Vint (1995) Whether national culture is 27 countries Empirical Uncertainty avoidance and individualism exert a significant positive effect on
associated with accounting disclosure practices compared to power distance and masculinity
disclosures.
Hussein (1996) The association between Firms from the USA and the Comparative Social, environmental disclosure is significantly higher for Dutch companies
Hofstede’s cultural dimensions Netherlands. study compared to American ones since there is a significant difference between the
and financial reporting. two countries in the masculine/feminine dimension (i.e. USA score amounts to
64 for masculinity, Netherlands score of accounts 14).
Zarzeski (1996) The association national culture A sample of 256 annual Empirical Individualism and masculinity are positively related to disclosure, while
and accounting disclosure reports from France, uncertainty avoidance is negatively related. Power distance is not significantly
practices. Germany, Hong Kong, Japan, associated with disclosure.
Norway, the United Kingdom
and the United States.
Jaggi and Low (2000) The association national culture A sample of 505 from 28 Empirical Power distance and individualism have a significant positive effect on financial
and financial disclosure. civil and common law disclosure practices, while masculinity is negatively associated with financial
countries. reporting. Legal system (common versus civil system) moderates these
relationships.
Hope (2003) The effect of national culture A sample 1,851 observations Empirical Individualism (masculinity) has a significant positive (negative) effect on firm-
on disclosure from 39 countries disclosure level. Legal system moderates these relationships.
Garcia-Sanchez et al. The effect of national culture 1,590 largest companies Empirical Collectivism and feminism cultural values have a significant effect on integrated
(2013) on integrated reporting worldwide over the period reporting, while uncertainty avoidance, power distance and long term orientation
2008-2010 are not significant associated with the same variable.
37
Table 2. Continued
Reporting policy- Accountants’ interpretation of accounting standards
Schultz and Lopez Accounting estimates concerning warranty Each country supplied Experiment Warranty expenses and their corresponding liabilities recorded are higher for
(2001) expenses among accounting professionals 16 participants for a French accountants compared to German professionals. American accountants
in France, Germany, and the United States total exhibit less risk aversion since warranty expenses are lower compared to French
having different levels of uncertainty. of 48. and German accountants
Doupnik and The effect of national culture on the Professional Experiment The German accountants appear to be more conservative; for example, Germans
Richter (2004) interpretation of “in context” verbal accountants from exhibit a conservative bias in their interpretation of the word “probable”
probability expressions. Germany and USA commonly used in several IFRS standards.
Doupnik and Riccio The influence of secrecy on the 77 professional Experiment Brazilian accountants adopt a more conservative approach in recognizing
(2006) interpretation of verbal probability accountants from elements that increase income compared to US accountants.
expressions in IFRS standards Brazil and 107 from
USA
Tsakumis (2007) The effect of national culture on A sample of 49 Greek Experiment U.S. accountants exhibit more conservatism than Greek accountants and latters
accountants’ recognition and disclosure of and 51 US accountants are less likely to disclose information compared to their US counterparts.
contingent liabilities
Chand et al. (2012) The national culture on students’ A sample of Experiment Chinese students exhibit greater conservatism and secrecy compared to
interpretation and application of Australian (39) and Australian students.
uncertainty expressions related to Chinese students (229)
recognition of assets and liabilities and
disclosure in IFRS.
Reporting policy- earnings management
Guana and The effect of national culture on earnings A sample of 13,793 Empirical Individualism has a significant positive effect on earnings management, while
Pourjalalia (2005) management. observations Australia, uncertainty avoidance and long-term orientation have a significant negative
Japan, Hong Kong, effect on the same variable.
Malaysia and
Singapore.
Nabar and The effect of national culture (uncertainty A sample of 30 Empirical Earnings management is relatively high in countries with high uncertainty
Boonlert-U-Thai avoidance, power distance, masculinity countries avoidance scores.
(2007) and individualism) on earnings
management
38
Table 2. Continued
Reporting policy- earnings management
Doupnik (2008) The effect of national culture on earnings A sample of 31 countries Empirical Uncertainty avoidance is positively associated with earnings
management management, while individualism has a negative effect on the same
variable. For the remaining cultural dimensions (masculinity, power
distance, long-term orientation), the relationship is not significant.
Han et al. (2010) The effect of national culture on earnings A sample of 96,409 firm– Empirical Discretionary accruals are positively (negatively) related to
management year observations (18,609 individualism and masculinity (uncertainty avoidance). By contrast,
distinct firms) for the period power distance does not have a significant impact on discretionary
from 1992 to 2003 in 32 accruals
countries
Geiger and van The effect of secrecy score on the perceptions of A sample of 1,260 Experiment Secretive cultures were more accepting of earnings management
der Laan Smith earnings management participants from 13 activities.
(2010) countries
Guana and The relationship between cultural values and 84,748 firm-year Empirical Uncertainty avoidance is negatively associated with earnings
Pourjalalia (2010) earnings management observations across the 27 management downwards, while individualism, power distance, and
countries masculinity, have a significant positive effect on the magnitude of
earnings management.
Kanagaretnam et The relationship between cultural values and Sample of banks from 39 Empirical Banks operating in high individualism, high masculinity, and low
al. (2011) earnings management for banks. countries on the pre-financial uncertainty avoidance settings manage earnings to just-meet-or-beat
crisis period 1993-2006. the prior year's earnings. With respect to income smoothing, banks in
high individualism, high power distance, and low uncertainty
avoidance societies report smoother earnings.
Kanagaretnam et Whether national culture affects accounting A sample of international Empirical Individualism is negatively related to conservatism and uncertainty
al. (2014) conservatism in banking industry banks from for 70 countries avoidance is positively related to the same variable.
Gray et al. (2015) The relationship between cultural values and A sample of 15, 258 firm- Empirical Individualism has a significant positive effect on earnings
earnings management for European countries and year observations across 14 management, while power distance is not significantly associated with
whether IFRS adoption moderates such an European countries from this variable. For the post IFRS adoption period (2006-2009), the
association. 2000 to 2009. results remain stable for individualism, while they are negative and
significant for uncertainty avoidance
Reporting policy- social and environmental reporting
Orij (2010) The effect of national culture on social disclosure A sample 600 large Empirical Individualism and long term orientation (power distance) are
companies from 22 countries positively (negatively) associated with social disclosures
Khlif et al. (2015) Whether national culture moderates the A meta-analytic sample of 42 Meta-analysis For settings characterised by low (high) individualism, low (high)
association between profitability and social and empirical studies between masculinity and high (low) long-term orientation, there is a significant
environmental disclosure 1975 and 2013 (non-significant) association significant between corporate
profitability and CSED.
39
Table 2. Continued
Auditing
Chan et al. The effect of national culture on audit-detected A sample of 80 Empirical Power distance and individualism are positively related to audit-detected
(2003) accounting errors in accounts receivable, accounts firms from 22 accounting errors in accounts receivable, accounts payable, while they do
payable and inventories. countries not have a significant effect on errors related to inventories.
Hope et al. The effect of secrecy on auditor choice A sample of 91,030 Empirical Secrecy is negatively associated with the likelihood of choosing Big-4
(2008) firm-year auditors.
observations from
37 countries from
1992 to 2004
Taxation
Tsakumis et al. The effect of national culture on tax evasion. A sample 50 Empirical Uncertainty avoidance and power distance (masculinity and individualism)
(2007) countries. have a significant positive (negative) effect on tax evasion.
Richardson The effect of national culture on tax evasion. A sample of 47 Empirical Uncertainty avoidance has a significant positive effect on tax evasion, while
(2008) countries. individualism. Neither power distance, nor masculinity exerts a significant
effect on tax evasion.
Miscellaneous
Kimbro (2002) The effect of national culture on corruption A sample of 61 Empirical Corruption is an increasing function of individualism and power distance.
countries
Ringov and The effect of national culture on social and A sample 463 firms Empirical Power distance and masculinity have a significant negative effect social and
Zollo (2007) environmental performance. from 23 North environmental performance, while neither individualism nor masculinity is
American, European significantly associated with the same variable
and Asian countries
Bilinski et al. The effect of national culture on analyst target price Analyst target price Empirical Power distance, masculinity and individualism have a significant negative
(2013) accuracy. accuracy effect on analyst target price accuracy, while uncertainty avoidance is
positively associated with the same variable.
Salter et al. The relationship between national culture and A sample 1,134 Empirical Individualism and long term orientation have a significant negative effect on
(2013) escalation of commitment MBA students escalation of commitment, whereas uncertainty avoidance is not
surveyed from 9 significantly related.
countries
40
Table 2. Continued
Miscellaneous
Li et al. (2013) The effect of cultural dimensions on risk-taking A sample of 7,250 Empirical Individualism has a positive effect on both risk-taking measures, while
measures firm-level uncertainty avoidance is negatively associated with the same measures.
observations from 35
countries
Shao et al. Whether individualism has an effect on R&D A sample of 68, 329 Empirical Individualistic settings invest more in long-term (risky) than in short-term
(2013) firm years from 44 (safe) assets.
countries over the
period 1991-2010
Mihret (2014) The effect of national culture (uncertainty A sample of 66 Empirical Power distance and uncertainty avoidance have a positive effect on fraud
avoidance, masculinity, individualism, power countries risk, long-term orientation is negatively associated with the same variable.
distance, long-term orientation) on fraud risk
Chen et al. The association between national culture and cash A sample of 27, 801 Empirical Individualism is negatively associated with cash holdings, while uncertainty
(2015) holdings firms from 41 avoidance is positively related to cash holdings.
countries
Zhang et al. Whether national culture has an effect on firm Data of listed Empirical Individualism is positively associated with firm investment bias and that
(2015) investment efficiency companies from 18 uncertainty avoidance and masculinity are negatively related to firm
countries investment bias
41

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Meditari Accountancy Research

Hofstede’s cultural dimensions in accounting research: a review

*Related content and download information correct at time of download.

Article type: Literature review

Design/methodology/approach: I combines electronic and manual searches to identify

and “accounting” or “auditing” or “taxation”. My search yields a total number of 35 published

Originality/value: This literature review represents a historical record, an introduction and a

Key words: Hofstede’s cultural dimensions, accounting research

systematic differences in management behaviour (Steenkamp, 2000). Cultural norms and

integrate the cross-national differences in societal values (culture) in explaining management

Orij, 2010; Salter et al., 2013; Khlif et al. 2015).

However, a comprehensive review of the impact of Hofstede’s framework is lacking in

summarise this field of research in accounting.

Based on a sample of 35 published studies, I identify four main streams of accounting

research using Hofstede’s cultural dimensions in explaining accounting phenomena including

environmental disclosure. The mainstream of studies focuses on selected Hofstede’s cultural

dimensions1. Finally, a synthesis of empirical findings shows that (i) individualism is

manipulations (iii), uncertainty avoidance is associated with improved disclosure practices

social and environmental disclosure.

main accounting topics examined in connection with national culture, different

analysis for reviewed studies.

development of the use of Hofstede’s cultural dimensions in accounting research. Section 4

avenues. Finally, section 6 concludes the paper.

2. Hofstede’s cultural dimensions and accounting

dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term

may affect reporting policy, tax evasion and auditing practices.

2.1. The concept of culture

the psychological factors in decision-making (Salter et al., 2013), countries’ ﬁnancial

individualism versus collectivism, masculinity versus femininity, uncertainty avoidance and

Sloan, and Sweeney 1996).

Individualism refers to the degree to which a country supports individual or collective

attribute great importance to operating performance as sound corporate performance gives

2.2. Critics addressed to Hofstede’s cultural dimensions

However, several criticisms have been addressed to Hofstede’s approach.

is strongly influenced by country economic development. This implies that Hofstede’s

more obscure and disputable than it brings insights.

Furthermore, masculinity/femininity reflects the percentage of professional and technical

different nations rather than national culture (Baskerville, 2003).

IBM is characterised by a single, uniform and monopolistic organisational culture implying

(Schwartz, 1994; Soares et al., 2007)3.

2.3. Hofstede’s cultural dimensions and reporting policy

More specifically, Gray (1988) distinguishes between four accounting values

critical role in shaping country’s accounting system (e.g. IFRS adoption).

secrecy may be influenced by cultural values. Secrecy is defined by Gray (1988: 8) as a

social responsibility is mainly influenced by national culture implying that stakeholders’

corporate reporting practices in this regard.

uncertainty-avoidant settings, rules would support a conservative approach to earnings

2.4. Hofstede’s cultural dimensions and auditing

reluctant to accept audit engagement in countries characterised by high secretive culture.

Thus, the likelihood of overriding existing controls increases in companies characterised by

the same vein, in individualist companies, employees may emphasise on short-term

personnel turnover. Numerous changes of personnel, specifically top accounting personnel,

opportunistic attitude. Furthermore, management, in individualist companies, places more

reliance on accounting numbers for performance evaluation leading to aggressive earnings

management (Hofstede 2001; Chan et al., 2010).

2.5. Hofstede’s cultural dimensions and taxation

3. Literature search and trend in the use of Hofstede’s cultural dimensions

include “national culture” or “Hofstede’s cultural dimensions” and “accounting” or “auditing”

Insert Table 1 about here

International Journal of Accounting with 4 published papers, Asia-Pacific Journal of

Accounting & Economics, Journal of International Accounting Research with 3 published

Insert figure 1 about here

4.1. Reporting policy

reporting systems, financial reporting policy, accountants’ interpretation of accounting