Earnings Management and Local vs. International Accounting Standards of European Public Firms
52 Pages Posted: 3 Dec 2008 Last revised: 1 Jun 2009
Date Written: September 1, 2008
Abstract
We examine how the transition from local GAAPs to IAS/IFRS of companies that are publicly traded on a European stock exchange affects earnings management. To measure earnings management we apply 15 different proxies. In analyzing 17 European countries and more than 18,000 firm-year observations we observe that companies applying IAS/IFRS experience less earnings management than firms applying domestic standards. However, while this is true for Central European countries, UK and Ireland (English legal origin) as well as Northern European Countries (Scandinavian legal origin) show a different behavior. They already have lower earnings management levels prior to IAS/IFRS adoption compared to the rest of Europe. For these countries the transition from local GAAPs to IAS/IFRS does not change their earnings management behavior. Apart from this, we show that firm size and time have no significant effect on earnings management and that growth firms exhibit higher levels of earnings management. In comparing the results for all 15 earnings management measures we conclude that different measures seem to capture different dimensions of earnings management.
JEL Classification: M41, M43, M44, M47
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
International Accounting Standards and Accounting Quality
By Mary E. Barth, Wayne R. Landsman, ...
-
Mandatory IFRS Reporting Around the World: Early Evidence on the Economic Consequences
By Holger Daske, Luzi Hail, ...
-
International Financial Reporting Standards (IFRS): Pros and Cons for Investors
By Ray Ball
-
Financial Statement Effects of Adopting International Accounting Standards: the Case of Germany
By Mingyi Hung and K.r. Subramanyam
-
Market Reaction to the Adoption of IFRS in Europe
By Chris Armstrong, Mary E. Barth, ...
-
Market Reaction to the Adoption of IFRS in Europe
By Chris Armstrong, Mary E. Barth, ...
-
By Vicentiu Covrig, Mark L. Defond, ...
-
Adopting a Label: Heterogeneity in the Economic Consequences Around IAS/IFRS Adoptions
By Holger Daske, Luzi Hail, ...