CEOs’ accounting-based attributes and earnings management strategies under mandatory IFRS adoption

Kouaib, Amel; Jarboui, Anis; Mouakhar, Khaireddine

doi:10.1108/jaar-04-2017-0051

Cited by 20 publications

(24 citation statements)

References 53 publications

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“…Adoption of IFRS reduces earnings management and, consequently, increases earnings reliability. These results are in line with those of Kouaib et al (2018). Note(s): This table summarizes the regression results of the DID approach.…”

Section: Jaar 222supporting

confidence: 85%

“…First, most studies investigating the effects of IFRS are based on the short history of IFRS adoption (Br€ uggemann et al, 2013). Few studies use a longitudinal design (Garcia et al, 2017;Persakis et al, 2017;Kouaib et al, 2018). With a short time frame, financial statement producers may face difficulties due to the complexity of international standards.…”

Section: New Insights Into Ifrs and Earnings Quality 307mentioning

confidence: 99%

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New insights into IFRS and earnings quality: what conclusions to draw from the French experience?

Benkraiem¹,

Saad²,

Lakhal³

2021

JAAR

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PurposeThe purpose of this study is to examine the effect of International Financial Reporting Standards (IFRS) on earnings quality in a continental European context (i.e. France) more than a decade after their mandatory adoption. Furthermore, the authors investigate whether the IFRS effect depends on firm-specific incentives.Design/methodology/approachThe authors construct an aggregated measure that considers the main qualitative information characteristics: reliability and relevance. They identify accruals quality, earnings smoothing and the degree of conditional conservatism as attributes of reliability and use earnings persistence, predictability, value relevance and timeliness to measure earnings relevance. To test the hypotheses, the authors use a sample of French listed companies. The analyses are based on ordinary least squares (OLS) fixed effects, the Newey–West estimator and the difference-in-difference approach. The authors also use cluster analysis to identify firms with high incentives for earnings quality.FindingsThe results reveal a decrease in earnings quality that persisted for a decade after IFRS adoption. This decrease is mainly due to a decline in earnings relevance, suggesting that the fair value principle worsened earnings volatility. However, the results show that there is an improvement in earnings reliability after IFRS adoption, suggesting that the international standards were able to constrain managerial opportunism. Additionally, the findings reveal that firm-specific incentives can enhance the positive effect of IFRS, but the incentives are not able to substitute for such effect.Research limitations/implicationsThe IFRS effect depends on firm-specific incentives.Practical implicationsThe authors prove that firm-specific incentives are important to accentuate the positive effect of IFRS on earnings reliability and to mitigate the impact of IFRS on earnings relevance.Originality/valueThis paper makes several contributions to the literature. First, it addresses the relative lack of attention to the main qualitative characteristics in measuring earnings quality, that is, earnings reliability and earning relevance, and uses an aggregate earnings quality measure. Second, this paper uses a cluster analysis to highlight the role of firm-specific incentives in shaping the effect of IFRS on earnings quality.

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Section: Jaar 222supporting

confidence: 85%

Section: New Insights Into Ifrs and Earnings Quality 307mentioning

confidence: 99%

New insights into IFRS and earnings quality: what conclusions to draw from the French experience?

Benkraiem¹,

Saad²,

Lakhal³

2021

JAAR

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“…It is noteworthy that Eq. (2) model is consistent with that employed by previous studies for the calculation of normal and abnormal production costs and discretionary expenses (Al-Amri et al , 2017; Kouaib et al , 2018; Ravenda et al , 2019). Therefore, AbSOC_Tot is the difference between actual SOC t (deflated by ln(TA t-1 ) ) and normal SOCs (NSOCs) estimated by the fitted values of Eq.…”

Section: Methodssupporting

confidence: 87%

Measuring labour tax avoidance and undeclared work: evidence from tax-avoidant offending firms

Ravenda

Valencia‐Silva

Argilés‐Bosch

et al. 2020

JAAR

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PurposeThis paper develops novel proxies for labour tax avoidance (LTAV) and tests their validity within a sample of 189 labour tax-avoidant offending firms (LTAOFs) accused of evading social security contributions (SOCs) by public authorities.Design/methodology/approachLTAV proxies are based on abnormal values of SOCs paid, reported in the income statements of a sample of 857,790 Spanish firm-years for the period 2001–2015, estimated through two-stage least square panel data regressions with firm fixed effects.FindingsThe results reveal that proxies specifically built to signal both conforming and non-conforming LTAV can provide evidence of abnormally low SOCs as expenses within the sample of LTAOFs. Furthermore, firm-specific financial variables as well as macroeconomic variables significantly influence LTAV.Research limitations/implicationsThis study could foster further research on the efficacy of the LTAV proxies and on the drivers and sustainability implications of LTAV for firms and their stakeholders in different socio-economic and institutional contexts.Practical implicationsThese LTAV proxies could integrate other methods applied to estimate the undeclared work and its trends. Furthermore, they may assist tax authorities to direct their inspections, detect labour tax evasion and then strengthen the social protection of the employees from employers' illegal exploitation practices, as well as reducing tax revenue shortfalls and related sustainability concerns in the social security systems.Originality/valueThis study proposes a novel methodology to examine LTAV and its determinants through accounting information. This methodology may support researchers to provide a more comprehensive picture of tax planning strategies pursued by companies, that include LTAV, and in this way integrate the extant mature literature on income tax avoidance.

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“…The latest research results have proved that authors focused on different issues and perspectives of earnings management. Kouaib et al (2018) focus on the moderating effects of mandatory I.F.R.S. adoption on the relationship between education and experience of top management and earnings management.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Earnings management in V4 countries: the evidence of earnings smoothing and inflating

Klieštik

Belás

Valášková

et al. 2020

Economic Research-Ekonomska Istraživanja

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Earnings management is one of the most challenging, debated and controversial topics in finance and financial management. Organisational, legislative, and social norms regarding the ethics of earnings management may vary significantly, with the views of top management and economic environment playing significant roles in shaping the organisational social norm. Thus, the aim of this research is to assess if earnings management is the common practice of enterprises within V4 countries. A novel approach of the selection process to assess the ability of selected earnings management detection models was applied. To highlight discrepancies and similarities among the countries, the non-parametric alternative of analysis of variance was applied. The research confirmed that enterprises do manipulate earnings, typical is upward manipulation. Furthermore, the research unveiled the extent of manipulation with earnings in unique country samples and thus emphasised the importance of both corporate and national ethical principles and managerial decisions, which affect corporate financial reporting quality. However, it is increasingly challenging to identify various aspects and incentives which forced enterprises operating at the global level to smooth and inflate earnings to improve earnings presented in the financial statements and to misinterpret financial results.

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CEOs’ accounting-based attributes and earnings management strategies under mandatory IFRS adoption

Cited by 20 publications

References 53 publications

New insights into IFRS and earnings quality: what conclusions to draw from the French experience?

New insights into IFRS and earnings quality: what conclusions to draw from the French experience?

Measuring labour tax avoidance and undeclared work: evidence from tax-avoidant offending firms

Earnings management in V4 countries: the evidence of earnings smoothing and inflating

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