Confucian Culture and Accounting Information Quality

Abstract

This paper links accounting information quality to Confucianism, the most prevalent traditional culture in China. We examine the relation between Confucian culture and accounting information quality by public data of the listed companies from 2007 to 2013. Results indicate that Confucian culture can significantly improve reliability of financial reports, as well as transparency of information disclosure, both economically and statistically. Results remain unchanged after we consider endogeneity problem and other robustness checks. This study contributes to the literature not only by enriching the corporate governance theory in which Chinese traditional culture was embedded, but also providing empirical evidence on the role of the informal institution, such as Confucianism in corporate governance.

Keywords: Confucian Culture, Accounting Information Quality, Financial Reports Reliability, Information Disclosure Transparency

JEL Classification: F0, F239, G02