Steering through uncertainty: How organizational culture shapes earnings management

This study aims to assess the role of banking’s organisational culture on the use of discretionary loan loss provisions (DLLPs), with a specific focus on understanding how cultural dimensions influence accounting practices. Regression models were estimated by leveraging a balanced panel data of 200 listed European banks for the period 2012–2023. The findings reveal that banks characterised by Create-dominant and Compete-dominant cultures engage in more earnings management practices than Control and Collaborate cultures. However, the introduction of Expected Credit Loss (ECL) narrows the gap in earnings management practices between banks with Control and Collaborate-dominant organisational cultures and those with Create and Competedominant organisational cultures. The findings will be of interest to practitioners who assess the quality of financial reporting within the banking sector.