The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa

  • Authors

    • Yosra Mnif Sellami High Institute of Business Administration of Sfax
    • Imen Slimi faculty of Economics and management
    2016-06-22
    https://doi.org/10.14419/ijaes.v4i2.6121
  • IFRS, Earnings Management, Corporate Governance, South Africa.

  • Abstract

    This research investigates the effect of mandatory transition of South African companies to IFRS on earnings management, essential attribute of accounting quality. Specifically, the study examines whether the mandatory adoption of IFRS is associated with reduction of earnings management and therefore, an improvement of accounting quality. In addition, the paper focuses on the effect of corporate governance factors on earnings management.

    Earnings management is assessed by the magnitude of discretionary accruals and accruals quality. The paper compares earnings management in the pre-mandatory IFRS adoption period; 2002-2004 and the post IFRS adoption period; 2010-2012. This study focuses on a sample of 276 firm-year observations, 46 firms drawn from the 413 South African listed companies. A regression model was applied to examine the relation between mandatory adoption of IFRS, corporate governance mechanisms and discretionary accruals controlling for other some factors explaining earnings management.

    Our findings show that mandatory adoption of IFRS by South African companies is associated with lower earnings management. This result suggests that mandatory transition to IFRS contribute to an improvement in the quality of accounting information. Furthermore, results show that the percentage of independent outside directors, the separation of roles of CEO and Chairman of the board and company size have significant influence on reducing discretionary accruals.

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  • How to Cite

    Mnif Sellami, Y., & Slimi, I. (2016). The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa. International Journal of Accounting and Economics Studies, 4(2), 87-95. https://doi.org/10.14419/ijaes.v4i2.6121

    Received date: 2016-04-19

    Accepted date: 2016-06-03

    Published date: 2016-06-22