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Can IFRS adoption mitigate earnings management in an emerging market?

Year: 2024

Type: article

Abstract: Research on the impact of the International Financial Reporting Standard (IFRS) mandate on the quality of financial reporting produced mixed findings. Several researchers showed that the IFRS mandate depresses earnings management since it improves comparability, and the principle-based approach offers limited alternatives for managers in reporting. Others have shown that it provides flexibility for managers in institutionally and legally weak countries. We examine whether the IFRS mandate depresses earnings management practices in South Africa. Using a sample of 206 firms listed on the Johannesburg Securities Exchange (JSE) from 2000 to 2010, our findings show that the IFRS mandate significantly reduces earnings management. Our findings contribute to the ongoing discussion about whether high-quality standards effectively mitigate earnings management practices and protect stakeholder rights in developing countries.

Source: Heliyon

DOI: 10.1016/j.heliyon.2024.e38226

Authors: Abdelnaser M. Mohamed Amer, Asil Azimli, Muri Wole Adedokun

Institutions: Cyprus International University, University of Mediterranean Karpasia

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $2,100