An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Alexis A. Downs
Emporia State University

Roxanne Gooch
University of Oklahoma

Abstract: Does the presence of herd behavior differ significantly from country to country due to cultural values and norms? According to Beckers et al. (2004 p. 82), “Geographical differences have now broadly disappeared, and earnings forecast error no longer reflects any significant country effects.” Although Beckers et al. (2004) are interested in forecast error and we are interested in forecast bias, their conclusion motivates this study. Researchers have investigated variations in legal regime as explanations for international differences in financial system (e.g. La Porta et al. 1997). We expect that legal origin is a conditioning factor but that the impact of legal origin may vary with other factors. Controlling for legal origin, we hypothesize that culture (as operationalized by Hofstede 2001) is important in explaining herd behavior among financial analysts. Although legal system is an important determinant of international differences in herd behavior, we find that culture matters.

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