Earnings management and derivatives reporting: evidence from the adoption of IFRS standards in Europe

Cadot, Julien; Rezaee, Amir; Chemama, Rebecca Benaïs

doi:10.1080/00036846.2020.1841085

Cited by 6 publications

(10 citation statements)

References 37 publications

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“…*, ** and *** indicate significance at 10%, 5% and 1%, respectively The results of our analysis lead to reject H1 and suggest that the IABS model leads to recognizing a greater magnitude of accruals than pre-IFRS standards. This is consistent with the argument that the IASB model requires using professional judgment to a greater degree than pre-IFRS standards (Ahmed et al, 2013b;Barth et al, 2008;Carmona and Trombetta, 2008;Capkun et al, 2016;Cadot et al, 2021;Callao and Jarne, 2010;De George et al, 2016).…”

Section: Regression Analysis 521 Total Samplesupporting

confidence: 88%

“…The fact that IFRS are more flexible than pre-IFRS standards is inferred from comparing the standards. The literature has repeatedly used this argument to support certain predictions about the potential effects that IFRS adoption would have on accounting quality and on the efficiency of capital markets (Ahmed et al, 2013b;Barth et al, 2008;Carmona and Trombetta, 2008;Capkun et al, 2016;Cadot et al, 2021;Callao and Jarne, 2010;De George et al, 2016). However, there has been no special interest in proving this extreme empirically, which is the purpose of this paper.…”

Section: Review Of Literature and Hypothesesmentioning

confidence: 97%

“…Moreover, asset impairment that requires a great number of hypotheses on the future plays a more prominent role in IFRS (Ball, 2016). In addition, IFRS are generally more sophisticated and complex (Cadot et al, 2021;Guggiola, 2010;Street and Larson, 2004) and require more estimates. For example, in most of pre-IFRS standards, share-based payments were not regulated, and the accounting treatment of financial assets and liabilities was less complex (Lantto and Sahlstr€ om, 2009).…”

Section: Review Of Literature and Hypothesesmentioning

confidence: 99%

“…Accounting flexibility is understood as the need to use professional judgment in applying standards (Ball, 2016;Wehrfritz and Haller, 2014). In the accounting literature, it is generally assumed that IFRS are more flexible than pre-IFRS standards (Ahmed et al, 2013b;Barth et al, 2008;Cadot et al, 2021;Callao and Jarne, 2010;Capkun et al, 2016;Carmona and Trombetta, 2008;De George et al, 2016). Although that flexibility can affect different accounting policies, in this paper we focus on the magnitude of accruals, i.e.…”

Section: Introductionmentioning

confidence: 99%

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The effect of mandatory adoption of IFRS on the magnitude of accruals

Sánchez

Inchausti

Noguer

2021

ARLA

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PurposeThis paper investigates whether the greater flexibility of International Financial Reporting Standards (IFRS) in contrast to accounting models that were used before those standards became mandatory meant a significant change in the magnitude of accruals recognized in the accounting income.Design/methodology/approach18,126 observations are analyzed on 1,881 non-financial companies in 19 European countries in 2000–2012. A difference-in-differences regression method is used. The treatment sample includes companies that were required to adopt IFRS as from the 2005 fiscal year, while the control sample comprises companies that voluntarily adopted IFRS prior to 2005.FindingsCompared to prior accounting standards, the mandatory adoption of IFRS increased the absolute value of accruals. This result is seen only in those companies where the magnitude of accruals is negative. The observed effect is independent of the degree of similarity between IFRS and prior standards.Originality/valueThis paper complements the literature analyzing the effect of IFRS on the financial statements and on the financial-economic indicators of companies. It analyzes the component of accounting income that is most sensitive to the use of professional judgment: accruals. Focusing on observed accruals helps avoid an error in measurement that can be made when working with the discretionary component of accruals. Additionally, a longer time horizon than in previous studies is considered.

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Section: Regression Analysis 521 Total Samplesupporting

confidence: 88%

Section: Review Of Literature and Hypothesesmentioning

confidence: 97%

Section: Review Of Literature and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The effect of mandatory adoption of IFRS on the magnitude of accruals

Sánchez

Inchausti

Noguer

2021

ARLA

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“…It is assumed that improvement in financial transparency also affects earnings management. This statement is criticised by professional observers due to its complexity, as shown by research conducted on the group of European-listed firms (Cadot et al 2021(Cadot et al , pp. 1628.…”

Section: Literature Reviewmentioning

confidence: 99%

Accounting Quality and Audit Attributes on the Stock Price Crashes in an Emerging Market

Salehi

Zimon

Hashim

et al. 2022

Risks

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This study addresses the relationship between accounting quality and audit attributes (i.e., audit quality, auditor industry specialization, audit concentration, and audit fees) with companies’ SPCRs listed on the Iraqi Stock Exchange. A multivariate regression model was used to test the hypotheses. The research hypotheses were tested using a sample of 210 observations of the listed Iraqi firms from 2013 to 2018 and a multiple regression model based on the random-effects model’s panel data technique. The findings indicate a negative and significant relationship between the accounting quality, audit, auditor industry specialization and SPCRs. Results also conveyed a meaningful and positive association between stock price crash risk (SPCR) and audit fees. The results did not confirm the relationship between corporate governance and audit concentration with SPCR. The primary research model was tested with additional methods (t + 1, fixed effects, ordinary least squares). Since this is the first study addressing this issue in the emerging markets, it provides users, analysts, and legal entities with helpful information about audit attributes that significantly affect SPCR. These results also contribute to developing science and knowledge in this field and fill the literature gap.

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Bankruptcy Risk and Its Effect on Earnings Management of Indonesian Firms

Nareswara,

Dewiyanti

2023

E3S Web Conf.

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The purpose of this study is to examine whether there is a notable relationship between bankruptcy risk measured by Altman Z-Score and earnings management in Indonesia. While many prior studies have analyzed the relevance of financial distress (which is often associated with bankruptcy risk) towards earnings management, there only exist few studies, to the best of authors’s knowledge, that specifically uses bankruptcy risk itself as one of possible influencing factors on earnings management. Regression analysis is performed on the financial data of firms listed in Indonesia Stock Exchange (IDX), with the final sample comprised of 404 firm-year observations. Using bankruptcy risk as the independent variable, the result indicates that there is no significant relationship between bankruptcy risk and earnings management, which is the similar conclusion that had been reached by few prior studies on the same topic.

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Earnings management and derivatives reporting: evidence from the adoption of IFRS standards in Europe

Cited by 6 publications

References 37 publications

The effect of mandatory adoption of IFRS on the magnitude of accruals

The effect of mandatory adoption of IFRS on the magnitude of accruals

Accounting Quality and Audit Attributes on the Stock Price Crashes in an Emerging Market

Bankruptcy Risk and Its Effect on Earnings Management of Indonesian Firms

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