Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/15830
Title: The impact of international financial reporting standards on earnings quality: EU evidence
Authors: Mohamad, Housam
Advisors: Chen, Q
Keywords: Earnings management;Corporate governance;Asymmetrically timely loss recogition;Deffered tax expense;Accruals anomaly
Issue Date: 2016
Publisher: Brunel University London
Abstract: Earnings have numerous properties that can be investigated, including earnings smoothness, abnormal accruals after modelling the accruals process and asymmetric timely loss and gain recognition. In latest decades, as earnings are the main source of firm-specific information for investors, earnings quality has become a significant focus in the financial accounting field. Moreover, high-quality financial reporting helps investors improve decisions and better evaluate firm performance because capital markets depend on the credibility of financial accounting information. The aim of this study investigates the impact of the mandatory adoption of IFRS on earnings quality in term of earnings management and accounting conservatism in consideration of eleven European countries (Germany, France, Italy, The Netherlands, Spain, Sweden, Switzerland, Portugal, Belgium, Norway and the United Kingdom) as a sample study. Then to test whether investors could predict a company’s future performance efficiently based on deferred tax expense as one of the accruals components before and after the mandatory adoption of IFRS. Since the mandatory adoption of International Financial Reporting Standards (IFRS) required by the European Union (EU) Parliament, numerous research studies have examined whether earnings management has been reduced due to the mandatory adoption. Chapter two of this study examines whether the board of directors is more effective in constraining earnings management after the mandatory application of IFRS. More specifically, the study explored ways that two board characteristics, board independence and the existence of an audit committee, have impacted earnings management since 2005. The empirical results with eleven European countries (Germany, France, Italy, The Netherlands, Spain, Sweden, Switzerland, Portugal, Belgium, Norway and the United Kingdom) showed evidence of an inverse relationship between the strength of corporate governance and the extent of earnings management. This negative association suggests that firms that apply IFRS with a high level of corporate governance standards are less likely to be involved in earnings management. This study indicates that board independence and the existence of audit committees play important and effective roles in reducing earnings management after the introduction of IFRS. The results also provide evidence that the internationally uniformed accounting regulatory framework significantly contributes to the effectiveness of the two corporate governance mechanisms. Chapter three examines the impact of the mandatory IFRS adoption on the asymmetrically timely gain and loss recognition (accounting conservatism). The findings provide evidence of the importance of the mandatory adoption of IFRS in increasing of accounting conservatism in pooled samples and separate samples. Chapter four investigates whether investors could predict a company’s future performance efficiently based on deferred tax expense as one of the accruals components before and after the mandatory adoption of IFRS. Moreover, whether or not the predictions could be generalised to other European countries was examined. The results imply that an accrual anomaly exists in pooled samples before and after mandatory IFRS adoption and the study prove that deferred tax expense as a determinant factor of accounting accruals is overweighed by stocks prices before and after IFRS adoptions.
Description: This thesis was submitted for the award of Doctor of Philosophy and was awarded by Brunel University London
URI: http://bura.brunel.ac.uk/handle/2438/15830
Appears in Collections:Economics and Finance
Dept of Economics and Finance Theses

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