Now, the really fascinating thing is you can see this happening at an aggregate level. For example, you can look at how reporting of profits and losses vary from year to year, to see if accountants are smoothing the figures. You can also look to see whether small losses are being under-reported (by being massaged away), and there a bunch of other clever ways to shine a light on murky dealings.
So, now you're itching to know whether more religious countries have more or less of this 'creative accounting' (technically, it's called 'earnings management'). Jeffrey Callen, chair of accounting at the Joseph L. Rotman School of Management, University of Toronto, has done just that.
He found that there was no relationship between earnings management and whether people in a country said religion was important to them, or that they were a religious person, or how often they went to religious services. Nor was there any relationship with the numbers of Catholics, Muslims, or religious people other than Protestants.
Countries with more Protestants did have less book-fiddling, but on delving into the stats this turned out to be because Protestant nations are also more individualistic - and that personality factor is the crucial thing that stifles creative accounting.
Interestingly, there was a correlation between the numbers of people who derive comfort from religion and the under-reporting of small losses. But it's hard to know what to make of this - it could just be a chance effect.
Now, Callen & Co were a bit surprised by this. They were expecting religion to suppress creative accounting. They suggest that what might be happening is that religious people may be persuading themselves that such book fiddling is all for the greater good - and thus morally acceptable.
But regular readers of this blog will know that this is not, in fact, a surprising result. The reality is that study after study has shown that profession of religion has almost no discernible effect on behaviour.
Callen, J., Morel, M., & Richardson, G. (2010). Do culture and religion mitigate earnings management? Evidence from a cross-country analysis. International Journal of Disclosure and Governance, 8 (2), 103-121 DOI: 10.1057/jdg.2010.31
This article by Tom Rees was first published on Epiphenom. It is licensed under Creative Commons.
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