Abstract
The purpose of this paper is to investigate the effects of predominant cultural values on banking disclosure. On one hand, Islamic banks have practiced Islamic principles which are universal for all countries. Islamic banks are expected to provide transparent information especially in terms of social and Shariah(Islamic) compliant information as Islamic banks claim themselves to have social objectives as the prime consideration. Islamic banks also have Shariah supervisory body to ensure that the banking activities and business operations are in line with Islamic requirements. On the other hand, Hofstede‘s cultural dimensions and Gray‘s hypotheses have rendered remarkable contributions in financial and accounting practices among different nations. Examining 45 Islamic banks in 11 Moslem majority countries, this paper focuses on four particular cultural dimensions namely individualism/collectivism, masculinity/femininity, uncertainty avoidance, and power distance and whether these dimensions have an impact on transparency. This study found that two out of four national cultures still have significant effect on the transparency level in Moslem majority countries.
Highlights
Each accounting system is a product of its specific culture and environment(Askary, Pounder, azdifar, 2008)
This study examines three out of six Hofstede‘s dimensions; Large versus Small Power Distance, Individualism versus Collectivism, and Strong versus Weak Uncertainty Avoidance
HYPOTHESIS This study aims to test one of Gray‘s hypotheses stating that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy
Summary
Each accounting system is a product of its specific culture and environment(Askary, Pounder, azdifar, 2008). Gray‘s paper in 1988 was a pioneering paper contributing the idea that culture might affect accounting practice (Chanchani and Willett, 2004). Gray proposed some hypotheses derived from Hofstede‘s societal values (Chanchani and Willett, 2004; Hofstede, 1991). Gray came up with four significant accounting value dimensions derived from accounting literature were offered, encompassing professionalism versus statutory control, uniformity versus flexibility, conservatism versus optimism, and secrecy versus transparency (Gray, 1988). Integrated with Hofstede‘s societal values, these accounting dimensions have been used to propose cultural areas categorizing the countries which can be grouped into areas on the basis of cultural characteristics. This study focuses on one accounting value dimension which is transparency. As Gray(1988) hypothesized that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy
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