Cultural influence on accounting practices in Romania: Empirical test of Gray's hypotheses

Abstract

The efforts of convergence and reform of worldwide accounting diminished diversity of standards and practices, but the influence of environmental factors causing diversity still persists. The aim of this paper is to study the relationship between national culture and current financial reporting practices of Romanian listed companies, by testing Gray's hypotheses (1988), using confirmatory factor analysis and structural equation modelling. Through an originally revised set of proxies for measuring cultural and accounting dimensions, this study reveals that cultural dimensions change over time, and the accounting practices as well. It also proves that only seven out of the thirteen relationships defined by Gray have significant values for Romanian culture of the last twenty years, three of them confirming Gray's theory and four contradicting it. This research helps to a better understanding of current accounting practices in Romania and provides support for drafting expectations regarding the influence of culture on accounting practices and changes in Romanian accounting system in the future.