HOW HAVE THE IAS/IFRS ADOPTION AFFECTED EARNINGS MANAGEMENT IN EU? THE EFFECT OF THE ABSENCE/DIVERGENCE OF REGULATION AND OF LEGAL ENFORCEMENT

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Abstract

This paper aims to investigate the effect produced by the adoption of IAS/IFRS on earn-ings management in European Union. We calculate four indexes for the periods 2000-2003 and 2006-2009 to identify different reasons that could lead insiders to manipulate earnings and by comparing them we observe that the IAS/IFRS first-time adoption produced different effects on earnings management depending on the countries analysed and the kind of earnings management investigated. Moreover, while we find a positive relation between the reduction of earnings management and the extent to which IAS/IFRS regulates issues not covered by domestic standards, on the contrary we do not find any relation be-tween the such reduction and the existing divergence between domestic standards and IASB stand-ards. Finally, our findings also show a positive and significant relation between the reduction of the earnings management and the level of the legal enforcement of each country.

Keywords: Earnings Management, Accounting Quality, IASB Standards

How to cite this paper: Mechelli, A., & Cimini, R. (2013). How have the IAS/IFRS adoption affected earnings management in EU? The effect of the absence/divergence of regulation and of legal enforcement. [Conference issue]. Corporate Ownership & Control, 11(1-2), 154-166. https://doi.org/10.22495/cocv11i1conf2p7