Relationships between national economic culture, institutions, and accounting: Implications for IFRS

•National economic culture influences institutions, and institutions further impact accounting.•Empirical results demonstrate that the influence of national economic culture on accounting is mediated by institutions.•Institutions’ mediating roles are explained, a theoretical model is outlined, and further research avenues are discussed.•These relationships imply that improving accounting entails much more than formal adoption of accounting standards.•The usefulness of nation-level culture datasets is contrasted with the need to also study unique, localized culture. National economic culture has an indirect influence on accounting at the national level through the mediating variable of institutions. The relationships are evaluated using measures of national economic culture from Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies (House et al., 2004); measures of institutions from the World Bank (Kaufmann et al., 2007); and measures of national accounting from the Financial Standards Foundation (2008). At the national level, institutions are found to mediate the relationship between economic culture variables and accounting. The empirical findings indicate that accounting in a given nation is linked to the nation's supporting institutions, which institutions in turn are influenced by the national economic culture of those who maintain them. This suggests that altering aspects of accounting within a nation can be expected to entail much more than formal adoption of standards, principles, or innovations. Institutional adjustments must be made and the impact of national economic culture must be understood and appropriately addressed.