The moderating effect of national culture on the relationship between debt maturity and conditional conservatism

Abstract

The objective of this study was to evaluate the moderating effect of national culture on the relationship between debt maturity and conditional conservatism. This research is relevant because it presents evidence that the cultural characteristics of countries influence this relationship. Previous literature indicates that debt maturity negatively affects conservative accounting reports. National culture may affect the quality of accounting information in studies of conditional conservatism, particularly with regard to debt maturity. The results provide valuable information for investors, analysts, auditors, and other users of financial statements from companies in different countries. The sample included 16 of the countries that comprise the G20 Group and was distributed between 2010 and 2023. There were a total of 162,188 observations covering 11,350 companies. The six cultural dimensions presented by Hofstede (1980, 2001) were evaluated. We measured conditional conservatism using Khan and Watts's (2009) model. The chosen debt maturities were three, four, and five years. The results showed that national cultures with high power distance, high uncertainty avoidance, and a high long-term orientation mitigate the negative relationship between debt maturity and conditional conservatism in the companies analyzed. It can be concluded that cultural contexts lead to more or less conservative accounting practices and may indirectly influence companies' choice of debt maturity.