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Language in economics and accounting research: the role of linguistic history

Gotti, Giorgio, Roberts, Seán G., Fasan, Marco and Robertson, Cole 2021. Language in economics and accounting research: the role of linguistic history. The International Journal of Accounting 10.1142/S1094406021500153
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Abstract

This paper investigates whether a consideration of linguistic history is important when studying the relationship between economic and linguistic behaviours. Several recent economic studies have suggested that differences between languages can affect the way people think and behave (linguistic relativity or Sapir-Whorf hypothesis). For example, the way a language obliges one to talk about the future might influence intertemporal decisions, such as a company’s earnings management. However, languages have historical relations that lead to shared features—they do not constitute independent observations. This can inflate correlations between variables if not dealt with appropriately (Galton’s problem). We discuss this problem and provide an overview of the latest methods to control for linguistic history. We then provide an empirical demonstration of how Galton’s problem can bias results in an investigation of whether a company’s earnings management behavior is predicted by structural features of its employees’ language. We find a strong relationship when not controlling for linguistic history, but the relationship disappears when controls are applied. In contrast, economic predictors of earnings management remain robust. Overall, our results suggest that careful consideration of linguistic history is important for distinguishing true causes from spurious correlations in economic behaviors.

Item Type: Article
Date Type: Published Online
Status: In Press
Schools: English, Communication and Philosophy
Subjects: H Social Sciences > HB Economic Theory
P Language and Literature > P Philology. Linguistics
ISSN: 2213-3933
Funders: Leverhulme Early Career Fellowship ECF-2016–435
Date of First Compliant Deposit: 16 March 2021
Date of Acceptance: 18 January 2021
Last Modified: 07 Sep 2021 12:41
URI: http://orca.cardiff.ac.uk/id/eprint/139783

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