How personal values influence earnings management ethics: the mediation role of moral disengagement

Abstract

ABSTRACT Earnings management (EM) is a critical ethical issue for the accounting profession. However, it remains unclear why accountants differ in their ethical judgements of EM, with some evaluating it as ethically acceptable while others do not. From the perspective of personal values, we explore how personal values influence accountants’ ethical judgement of EM through the mediation role of moral disengagement. A survey of 554 Chinese practicing accountants found that accountants with higher resultant conservation values were less likely to morally disengage, thus less tolerant of accounting manipulation, while accountants with higher resultant self-enhancement values were more likely to morally disengage, leading to greater tolerance for accounting manipulation. The results showed that moral disengagement fully mediated the relationship between personal values and ethics in accounting manipulation. Moreover, moral disengagement had no significant effect on ethics in operating manipulation. Our study has practical implications for educators, regulators, and companies combating EM.