Journal of Finance and Accounting
ISSN (Print): 2333-8849 ISSN (Online): 2333-8857 Website: Editor-in-chief: Apply for this position
Open Access
Journal Browser
Journal of Finance and Accounting. 2015, 3(3), 57-65
DOI: 10.12691/jfa-3-3-3
Open AccessArticle

The Impact of International Financial Reporting Standards (IFRS) on Earnings Management: A Review of Empirical Evidence

Indiael Daniel KAAYA1,

1Department of Commerce and Business Administration, Acharya Nagarjuna University, Andhra Pradesh, India

Pub. Date: January 05, 2016

Cite this paper:
Indiael Daniel KAAYA. The Impact of International Financial Reporting Standards (IFRS) on Earnings Management: A Review of Empirical Evidence. Journal of Finance and Accounting. 2015; 3(3):57-65. doi: 10.12691/jfa-3-3-3


The International Financial Reporting Standards (IFRS), the best breed, high quality and principle based reporting standards removes many allowable accounting alternatives [15]. It is therefore, consequently expected to limit the management’s discretion and lessen practices on earnings management [14]. Quite the opposite, some researchers squabble, that litheness instinctive in IFRS and its fair value pre-eminence might afford greater opportunities for firms to manage earnings [17,21]. It is this incongruity which incited and aggravated the conduct of this study. This study applies a desktop review to investigate the worldwide existing empirical research evidence on the impact of IFRS on earnings management post- IFRS adoption and in relation to other reporting standards and reports whether the results are indistinguishable between developed and developing economies. The findings reveal that the existing empirical crams and conclusions there on are mixed, inconsistent and difficult to generalise. This indicates the pressing need for country specific empirically tested studies of this nature. The study further, stumbles on the fact that IFRS can indistinctly benefit both developing and developed markets when coupled with appropriate effective enforcement machinery. Substantially, the results entail that IFRS is a critical determinant for quality reporting but not a ‘prima facie’ guarantor for quality reporting.

IFRS earnings management discretional accruals (DACC)

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Barth, M. E., Landsman, W. R., Lang, M. H. (2008):`International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498.
[2]  Onalo , U, Lizam,M and Kaseri, A (2014): `The effects of change in Accounting Standards on Earnings Management of Malaysia and Nigeria Banks’, Europen Journal of accounting, Auditing and Finance Research Vol.2(8),pp 15-42.
[3]  Van Tendeloo, B and Vanstraelen (2005): ‘Earning Management under German GAAP versus IFRS.’ European Accounting Review, Vol.14 (1), pp.155-180.
[4]  Wang, Y. and Campbell, M., (2012): ‘Earnings Management Comparison: IFRS Vs China GAAPs.’ International Management Review, Vol. 8 (1), pp.5-11.
[5]  Trabelsi Nadia S., Hamza Sarra, E., and Chila Hayfa (2013):`The effects of IFRS on Earnings Quality in European Stock Markets: Evidence from France’. Interdisciplinary Journal of Research in Business, Vol. 2(12), pp.35-47.
[6]  Lin Ching-Chieh., Hua, Chi-Yun., Lin, Wen-Hsiang, and Lee, Wen-Chih (2012): ‘IFRS adoption and Financial Reporting Quality: Taiwan Experiences’. International Journal of Academic Research in Accounting, Finance and management Sciences, Vol. 2(4), pp. 285.
[7]  Kaaya, I.D (2015): The International Financial Reporting Standards (IFRS) and Value Relevance: A Review of Empirical Evidence. Journal of Finance and Accounting. Vol. 3(3), pp 37-46. (
[8]  Benyasrisawat, Prawat (2011) Earnings persistence, value relevance, and earnings timeliness: The Case of Thailand, Durham theses, Durham University. Available at Durham E-Theses Online:
[9]  Blanchette, Michael, Racicot Francois-Eric and Sedzro Kolmlan, (2013): IFRS Adoption in Canada: An Emprical Analysis of the Impact on Financial statements, Certified Genera Accountants (CGA).
[10]  Ding Yuan, Hope Ole-Kristian, Jeanjean, Thomas and Stolowy Heme, (2007). ‘Differences between Domestic Accounting Standards and IAS: measurement, Determinants and Implications’. Journal of Accounting and Public Policy, Vol. 26, 1-38.
[11]  Herbert, Wilson E, Ene, Emeka, E and Tsegba Ioraver, N, (2014). Globalisation of Financial Reporting: Obstacles of IFRSs Adoption in Nigeria,’ Asian Journal of Business and Management Science, Vol. 3(12), 25-41.
[12]  Suadiye, G (2012): `Value Relevance of Book Value & Earnings under the Local GAAP and IFRS: Evidence from Turkey’. Ege Academic Review, Cilt: 12 (3), pp.301-310.
[13]  Limanto D and Fanani, Z (2014): Does IFRS, Firm Size, and Firm Leverage Influence Earnings management?Evidence from manufacturing Firms Listed in Indonesia Stock Exchange, SNA 17 Mataram Lombok, Univeristas Mataram.
[14]  Nouri Yosr and Abaoub Ezzeddine(2014): ‘Accounting manipulations and IFRS: Evidence from French Companies’. International Journal of Economics and Finance, Vol.6 (11), pp.229-244.
[15]  Cai L, Rahma, A and Courtenaay S (2008): The Effects of IFRS and its enforcement on earnings management : An International Comparison, Massey University, Newzealand, Ssrn Papers Series:
[16]  Nobes, Christopher (2011): `International variations in IFRS application and Practice’, Research Report no. 124, Certified Accountants Educational Trust, London.
[17]  Lin, S., Riccardi, W., & Wang, C. (2012): Does accounting quality change following a switch from U.S.GAAP to IFRS? Evidence from Germany. Journal of Accounting Public Policy, Vo. 31, 641–657.
[18]  Penman, Stephen, H (2007). ‘Financial Reporting Quality: Is Fair Value a Plus or Minus?’, Accounting and Business Research Special Issue: International Accounting Policy Forum,pp,33-44.
[19]  Ryan, Stepehen, G (2008). `Fair Value accounting: Understanding the Issues raised by credit crunch, Council of Institutional Investors, Whiter Paper.
[20]  Bosch, Patrick,. (2012): Value relevance of the Fair Value Hierarchy of IFRS 7 in Europe, How reliable are mark to marketr model Fair values?. Working Paper no.439/12/2012.
[21]  Ball, R. (2006): “IFRS: Pros and Cons for Investors”. Accounting &Business Research, 36(4): 5-27.
[22]  Jelic R, Wolfang A, Inwinkl P and Scheneider G (2010): ‘Earnings Management behavior and Choice of Accounting Standards’. JIBS Working Paper, No.2011-3, JONKOPING INT.BUSINESS SCHOOL.
[23]  Ball. R, A. Robin and J.S. Wu. (2003). Incentives versus Standards: Properties of Accounting Income in Four East Asian Countries and Implications for Acceptance of IAS. Journal of Accounting and Economics, 36 (1-3), 235-270.
[24]  United Nations Conference on Trade and Development (UNCTAD) (2008): `Practical Implementation of IFRS: Lessons learnt, country Case studies on IFRS’, New York and Geneva. Available on
[25]  United Nations Conference on Trade and Development (UNCTAD) (2010): `International accounting and reporting issues, 2010 review’, report by Secretariat, New York and Geneva.
[26]  Lee, Edward, Walker, Martin. and Zeng, Colin. (2013): ‘Does IFRS Convergence Affect Financial Reporting Quality in China?, ACCA research report 131. (London: CAET).
[27]  Tsakumis, George T,. (2007): ‘The influence of Culture on Accountants application of IFRSs Rules Abacus. Journal of Accountancy, Vol, 207 (14).
[28]  Tsakumis, George, T, Compbell, David, R and Douppnik, Timothy, S (2009):` International Financial Reporting Standards: Beyond the standards`. The AICPA Journal of Accountancy, Vol. 207.
[29]  Prather-Kinsey, J (2006): ‘Developing Countries with Developed –Country Accounting Standards: Evidence from South Africa and Mexico’. The International Journal of Accounting, Vol.41, pp.141-162.
[30]  Outa Erick. (2011): ‘The Impact of IFRS Adoption on the Accounting Quality of Listed Companies in Kenya’. International Journal of Accounting and Financial Reporting, Vol. 1 (1), pp. 212-241.
[31]  Chebaane S and Othman Hakim (2013): ‘Does the Adoption of IFRS Influence Earnings management towards small positive profits? Evidence from Emerging Markets’. International Journal of Social, Education, Economic and Management Engineering, Vol.7 (6), pp.630-636.
[32]  Wan Adibah Wan Ismail, Khairul Anuar Kamarudin, Tony van Zijl, Keitha Dunstan, (2013): “Earnings quality and the adoption of IFRS‐based accounting standards: Evidence from an emerging market”, Asian Review of Accounting, Vol. 21 Iss: 1, pp.53-73.
[33]  Jones, J.( 1991): Earnings management during import relief investigations, Journal of Accounting Research, pp.193-228.
[34]  Dechow, P., R. Sloan, and A. Sweeney (1995): Detecting earnings management, The Accounting Review, Vol. 70(2), pp. 193-225.
[35]  Healy, P.M. (1985): ‘The effect of bonus schemes on accounting decisions’. Journal of accounting and Economics 7, 85-107. North- Holland.
[36]  DeAngelo, LE, (1986): ‘Accounting numbers as market valuation substitutes: A study of management buyouts of public stockholders’, The Accounting Review, vol.61, no. 3, pp. 400-420.
[37]  Emamgholipour, M Mansourinia,E, Tabari,N.A.Y and Pouragahjan,A(2013): ‘The effects of Audit Quality on Earnings management : Evidence from Iran’. International Journal of Basic Science and Applied Research, Vol.2 (4), pp.399-404.
[38]  Capkun, V, Collino, D.W and Jeanjean T(2012): Does Adoption of IFRS deter Earnings Management ?. ssrn Paper Series: abstract=1850228.
[39]  Udayakumara, K.A and Weerathunga, P.R (2015): The Impact of IFRS/SLFRS Adoption on the Earnings Management of Sri Lankan Firms.
[40]  Ronen Joshua and Yaari Varda(2008): Earnings Management, Emerging Insights in Theory , Practice and Research, Springer Science and Business media LLC, Newyork, USA.
[41]  Healey, P.M., and J.M. Wahlen (1999): ‘Commentary: A Review of the earnings management literature and its implications for standard setting’. Accounting Horizon, pp.365-383.
[42]  Schipper, K. (1989): ‘Commentary on earnings management’. Accounting Horizons 3, pp. 91-102.
[43]  Sellami Mouna and Fakhfakh Hamadi (2013): ‘Effects of mandatory Adoption of IFRS on real and Accrual based Earnings management: Empirical Evidence France’. International Journal of Accounting and economic Studies, Vol.2 (1), pp.22-33.
[44]  Pratt, J, Peters, M Houston, R and Evans M (2012): ‘The Financial Reporting environment, Reporting Discretional and earnings Managenent : US GAAP Versu IFRS,. Kelley School of Business.
[45]  Farisha H, Hafiza, A.H and Zalailah S (2012): ‘Motivation for Earnings Management among auditors in Malaysia’. Procedia-Social and behavioral Science, Vol.65, pp.239-246, Available on
[46]  Tang, Hua (2012): ‘Research on relationship between Earnings management and auditor Changes based on New CAS of china Market’. Journal of Information Systems, Vol.8 (24).
[47]  Rudra T and Bhattacharjee. D (2012): ‘Does IFRS Influence Earnings Management?’. Journal of management Research, Vol. 4(1).
[48]  Tort Luz, P (2013): ‘Earnings Management Under IFRS and PGC’. Revista de Contabilidade y Direccion, Vol.16, pp.161-185.
[49]  Becker, C.L, Defond,M.L and Subramanyam, K,R (1998): ‘The Effects of Audit Quality on Earnings management’. Contemporary Accounting Research, Vol.15 (1), pp.1-24.
[50]  Gerayli, M.S, Yanesari, A.M and Maatoofi, A.R (2011): ‘ Impact of Audit Quality on Earnings management: Evidence from Inran’. International Research Journal of Finance and Economics, Vol.66, pp.77.
[51]  Wali Kawa (2013): ‘The Effects of Accounting Standards on management of earnings: Evidence from Germany’. Journal of scientific Engineering Research, Vol.4 (12), pp.2109.
[52]  Tendencias D and Constabil N (20130: ‘Earnings Management across European Union countries after IFRS Adoption; Presented at 13 Congress, Sao Paulo; Available on
[53]  Joia R.M and Nakao S.H (2014): ‘IFRSAdoption and Earnings Management in Brazilian Publicly Traded Companies’. Journal of Research in Accounting, Vol.8 (1), pp.22-28.
[54]  Heemskerk, M. and L. van der Tas (2006), Veranderingen in resultaatsturing als gevolg van invoering van IFRS, Maandblad voor Accountancy en Bedrijfseconomie, nov 2006, pp. 571579.
[55]  Jeanjean,T.,Stolowy,H. ,2008.Do accounting standards matter?An exploratory analysis of earnings management before and after IFRS adoption. Journal of Accounting and Public Policy Vol. 27, pp.480-494.
[56]  Houqe Nurul, M., Zijl Van, T.,and Karim, W,.(2010): The Effects of IFRS adoption and Investors protection on earnings quality around the world; Working paper Series, WP, No.70.
[57]  Beuren I.M and Kllan R.C (2015): ‘Effects of the Convergence to IFRS in Earnings management’. International Journal of Finance and Accounting, Vol.4 (1), pp.8-20.
[58]  Ngole, S (2012): Does IFRS improve the usefulness of accounting information in African capital markets? A PhD Thesis, Leeds University Business School, the University of Leeds, UK.
[59]  Mande, Bashir, (2014). ‘Emerging Nations and Financial Reporting Complex: A case for IFRS Adoption in Nigeria’. Journal of Finance, Accounting and Management, Vol.2 (1), 1-23.
[60]  Alfaraih, Mishari (2009): Compliance with IFRS and value relevance of Accounting in Emerging Stock markets: Evidence from Kuwait, A thesis submitted for award of degree of Doctor of philosophy, Queensland University of technology.
[61]  Hung, M., and Subramanyam, K.R. (2007): Financial statement effects of adopting international accounting standards: The case of Germany. Review of Accounting Studies.
[62]  Mazza T, Fornaciari L and Azzali,S (2014): ‘Earnings management under IFRS and during crisis: The case of listed Italian banks’. Universita DegliStudi Firnenze, IAAER Conference.
[63]  Dimitropoulos, Panagiotis E., Dimitrios Asteriou, Dimitrios Kousenidis, and Stergios Leventis (2013): The Impact of IFRS on Accounting Quality: Evidence From Greece. Advances in International Accounting. 29: 108-123.
[64]  Ahmed, S.A., Neel, M., & Wang, D. (2010): Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Working Paper, Texas A&M University.
[65]  Callao, S., Jarne, J., & Lainez, J. (2007): ‘Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting’. Journal of International Accounting, Auditing and Taxation, Vol. 16, pp. 148–178.
[66]  Christensen, H. B., E. Lee, and M. Walker (2008): ‘Incentives or standards: What determines accounting quality changes around IFRS adoption?‟ Financial Accounting and Reporting Section (FARS) Paper, the American Accounting Association.
[67]  Chua, Yi Lin, Chee Seng Cheong, and Graeme Gould (2012): The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence From Australia. Journal of International Accounting Research, 11(1): 119-146.
[68]  Nulla Yusuf, M (2014): ‘Does IFRS Influence Quality of Reporting?: An Empirical Evidence from Large Canadian Banks’. International Journal of Accounting and Education, Vol. 2(2), pp.85-109.
[69]  Lee, E., Walker, M. and Christensen, H.B. (2008): ‘Mandating IFRS: Its Impact on the Cost of Equity Capital in Europe, research report 105. (London: CAET).
[70]  Liu, Chunhui, Lee J. Yao, Nan Hu, and Ling Liu. (2011): The Impact of IFRS on Accounting Quality in a Regulated Market: An Empirical Study of China. Journal of Accounting. 26(4): 659-676.
[71]  Li, J. and Park, SK. (2012): Earnings Management Effects of IFRS Adoption and Ownership Structure: Evidence from China,’ Korea International Accounting Review, 41, 121-136.
[72]  Jeno, Beno (2011): ‘International Standardization effects on Business Management: Evidence from Hungary’. Global Journal of Management and Business Research, Vol.11 (6).
[73]  Sang-Kyu, P and Jing L (2012): ‘Earnings management effects of IFRS adoption and Ownership Structure: Evidence from China’. Korea International Accounting Review, Vol.41, pp.121-136.
[74]  Hendika F and Hdiwinarsih(2014): The effectof IFRS Implementation on Earnings Quality and Corporate value : An Empirical Study on Public manufacturing Companies’. The Indonesian Accounting Review, Vol. 4(1), pp.65-70.
[75]  Li Zining, Liu Qiliang and Luo Le (2013): ‘Principles Based versus Rules based Accounting Standards and Earnings Quality: Evidence from China`s Mandatory Adoption of IFRS’. Southern Methodist Univerisity , Wuhan Univeristy and Peking Univeristy.
[76]  Palacios-Manzano, M., Martinez-Conesa, I. (2014): “Assessing the Impact of IFRS Adaptation on Earnings Management: An Emerging Market Perspective”, Transformations in Business & Economics, Vol. 13, No 1 (31), pp.21-40
[77]  Karampinis, N. and Hevas, D. L. (2009): “The Effect of Mandatory Application of IFRS on the Value Relevance of Accounting Data: Some Evidence from Greece’. European Research Studies, Vol. XII (1), pp. 73-100.
[78]  Kao, Hui-Sung and Wei-Tzu-Han (2014): `The effect of IFRS, Information Asymmetry and Corporate Governance on the quality of Accounting Information’. Asian Economic and Financial Review, 4(2), pp. 226-256.
[79]  Chamisa, E.E. (2000): The Relevance and Observance of the IASC Standards in Developing Countries and the Particular Case of Zimbabwe, The International Journal of Accounting, 35(2), 267-286.
[80]  Zeng, Xiaoqing. Guo, Xicai, Yan, Chan-Tyan., and Xiong, Yuxuan (2012): ‘Value relevance of Financial assets fair Values: Evidence from Chinese Listed Companies’. African Journal of Business Management, Vol.6 (12), pp.4445-4453.