International Financial Reporting Standards and Earnings Management in Latin America

Posted: 18 May 2014 Last revised: 25 Jul 2016

See all articles by Verônica Santana

Verônica Santana

University of São Paulo (USP)

Alex Rathke

FEA-RP, University of São Paulo

Isabel Lourenço

Lisbon University Institute (ISCTE-IUL); University of São Paulo (USP)

Flávia Dalmácio

University of Sao Paulo (USP) - Faculty of Economics, Administration and Accounting of Ribeirão Preto (FEARP)

Date Written: 2014

Abstract

This study analyzes the level of earnings management in Latin America after the adoption of the International Financial Reporting Standards (IFRS) and analyzes the role of cross-listing in the United States. The literature on earnings management in less developed countries is still under construction, and few studies focus on this issue, especially with respect to Latin America, despite its relevant role in the global economy. This paper fills this gap in the literature as it analyzes the level of IFRS earnings management regarding the first and main Latin American countries applying IFRS (Brazil and Chile), when compared to the main Anglo-Saxon countries with IFRS tradition (United Kingdom and Australia), and with the main Continental European economies (France and Germany). The results show that Latin American firms present a higher level of earnings management than Continental European and Anglo-Saxon firms, and this opportunistic behavior remains significant when only global players with cross-listing in the United States are analyzed. Thus, even with a unique set of high quality accounting standards (IFRS) and strong reporting incentives, countries' specific characteristics still play an important role in the way IFRS is implemented in each country.

Keywords: IFRS, Latin America, Accounting Quality

JEL Classification: M40, M41, M49

Suggested Citation

Santana, Verônica and Rathke, Alex and Lourenço, Isabel and Dalmácio, Flávia, International Financial Reporting Standards and Earnings Management in Latin America (2014). Available at SSRN: https://ssrn.com/abstract=2438268 or http://dx.doi.org/10.2139/ssrn.2438268

Verônica Santana (Contact Author)

University of São Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

Alex Rathke

FEA-RP, University of São Paulo ( email )

Avenida Bandeirantes, 3900
Ribeirão Preto, São Paulo 14040-905
Brazil

Isabel Lourenço

Lisbon University Institute (ISCTE-IUL) ( email )

Complexo Indeg/Iscte
Av. Professor Anibal Bettencourt
Lisbon, 1600-189
Portugal

University of São Paulo (USP) ( email )

Brazil

Flávia Dalmácio

University of Sao Paulo (USP) - Faculty of Economics, Administration and Accounting of Ribeirão Preto (FEARP) ( email )

Av. Bandeirantes 3900 - Monte Alegre
Ribeião Preto, 14040-900
Brazil

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
2,658
PlumX Metrics