A Panel Examination of IFRS Adoption and Financial Statement Quality: Evidence from Selected Firms in Ghana
Keywords:
IFRS, Financial Statement Quality, Earnings Management, Discretionary Accruals, Pre-Adoption, Post-Adoption.
Abstract
This study examined the effect of IFRS adoption on the quality of financial statements of selected firms on the Ghana Stock Exchange. The study used the extent of management practices as a metric for financial statement quality. The audited annual reports of the selected firms from the GSE were analyzed using a panel regression model over the period 2001-2006 and 2007-2014. The study finds the adoption of IFRS to be significantly and negatively affect earnings management practices and, thus, improves financial statement quality. On the extent of earnings management practices, the study finds a decrease in the post-adoption era as opposed to the pre-adoption era, signifying an improvement in accounting quality. The panel regression results show that adopting IFRS significantly decreases the extent of earnings management.
References
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Ahmed, A. S., Neel, M., & Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary accounting research, 30(4), 1344-1372.
Barth, M. E., Landsman, W., Lang, M., & Williams, C. (2006). Accounting quality: International accounting standards and US GAAP. Manuscript, Stanford University, 1-46.
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Fields, T. D., Lys, T. Z., & Vincent, L. (2001). Empirical research on accounting choice. Journal of accounting and economics, 31(1-3), 255-307.
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Paanamen, M., & Lin, H. (2009). The development of accounting quality of IAS and IFRS over time: the case of Germany. Journal of International Accounting Research, 8(1), 31-35.
Peña, H. F. P., & Franco, J. B. (2017). Impact of IFRS on the quality of financial information in the United Kingdom and France: Evidence from a new perspective. Intangible Capital, 13(4), 850-878.
Psaros, J. I. M., & Trotman, K. T. (2004). The impact of the type of accounting standards on preparers’ judgments. Abacus, 40(1), 76-93.
Revsine, L., Collins, D. W., Johnson, W. B., Mittelstaedt, H. F., & Soffer, L. C. (1999). Financial reporting & analysis. Upper Saddle River New Jersey: Prentice-Hall.
Smyth, R., & Söderberg, M. (2010). Public interest versus regulatory capture in the Swedish electricity market. Journal of Regulatory Economics, 38(3), 292-312.
Srivastava, A., Sunder, S., & Tse, S. (2015). Timely loss recognition and termination of unprofitable projects. China Journal of Accounting Research, 8(3), 147-167.
Tendeloo, B. v., & Vanstraelen, A. (2005). Earnings management under German GAAP versus IFRS. European Accounting Review, 14(1), 155-180.
Umoren, A. O., & Enang, E. R. (2015). IFRS adoption and value relevance of financial statements of Nigerian listed banks. International journal of finance and accounting, 4(1), 1-7.
Uyar, M. (2013). The Impact of Switching Standard on Accounting Quality. Journal of Modern Accounting and Auditing, 9(4), 459-479.
Vishnani, S., & Shah, B. (2008). International differences in the relation between financial reporting decisions and value relevance of published financial statements-with special emphasis on impact of cash flow reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Watts, L., & Zimmerman, J. L. (1986). Positive Accounting Theory.
Zamri, N., Rahman, R. A., & Isa, N. S. M. (2013). The impact of leverage on real earnings management. Procedia Economics and Finance, 7, 86-95.
Ahmed, A. S., Neel, M., & Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary accounting research, 30(4), 1344-1372.
Barth, M. E., Landsman, W., Lang, M., & Williams, C. (2006). Accounting quality: International accounting standards and US GAAP. Manuscript, Stanford University, 1-46.
Christensen, H. B., Lee, E., Walker, M., & Zeng, C. (2015). Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), 31-61.
Fields, T. D., Lys, T. Z., & Vincent, L. (2001). Empirical research on accounting choice. Journal of accounting and economics, 31(1-3), 255-307.
Gordon, L. A., Loeb, M. P., & Zhu, W. (2012). The impact of IFRS adoption on foreign direct investment. Journal of accounting and public policy, 31(4), 374-398.
Governance, GC (2013). Amertha ISP, 2013, The Effect of Return On Asset on Earnings Management Practices with Moderated Corporate Governance, E-Journal of Accounting at Udayana University, 4(2), 373-387.
Iatridis, G. (2010). International Financial Reporting Standards and the quality of financial statement information. International review of financial analysis, 19(3), 193-204.
Kang, W. (2013). The impact of mandatory IFRS adoption on the earnings–returns relation. Applied Financial Economics, 23(13), 1137-1143.
Kargin, S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance, 5(4), 71-80.
Kosi, U. (2010, May). Credit relevance of accounting information and mandatory IFRS adoption. In An Enterprise Odyssey. International Conference Proceedings (p. 662). University of Zagreb, Faculty of Economics and Business.
Lambert, R. A. (2001). Contracting theory and accounting. Journal of Accounting and Economics, 32(1-3), 3-87.
Musa, A., & Muhammad Tanimu, I. (2017). International Financial Reporting Standards and Value Relevance of Financial Information: An Empirical Evaluation of Selected Nigerian Listed Companies. International Journal of Accounting & Finance Review, 1(1), 1-11. https://doi.org/10.46281/ijafr.v1i1.13
Nico, A., & Hengky. (2017). Factors affecting earnings management in the Indonesian Stock Exchange. Journal of Finance and Banking Review, 2(2), 8-14.
Okpala, K. E. (2012). Adoption of IFRS and Financial Statement Effects:The Perceived Implications on FDI and Nigeria Economy. Australian Journal of Business and Management Research.
Paanamen, M., & Lin, H. (2009). The development of accounting quality of IAS and IFRS over time: the case of Germany. Journal of International Accounting Research, 8(1), 31-35.
Peña, H. F. P., & Franco, J. B. (2017). Impact of IFRS on the quality of financial information in the United Kingdom and France: Evidence from a new perspective. Intangible Capital, 13(4), 850-878.
Psaros, J. I. M., & Trotman, K. T. (2004). The impact of the type of accounting standards on preparers’ judgments. Abacus, 40(1), 76-93.
Revsine, L., Collins, D. W., Johnson, W. B., Mittelstaedt, H. F., & Soffer, L. C. (1999). Financial reporting & analysis. Upper Saddle River New Jersey: Prentice-Hall.
Smyth, R., & Söderberg, M. (2010). Public interest versus regulatory capture in the Swedish electricity market. Journal of Regulatory Economics, 38(3), 292-312.
Srivastava, A., Sunder, S., & Tse, S. (2015). Timely loss recognition and termination of unprofitable projects. China Journal of Accounting Research, 8(3), 147-167.
Tendeloo, B. v., & Vanstraelen, A. (2005). Earnings management under German GAAP versus IFRS. European Accounting Review, 14(1), 155-180.
Umoren, A. O., & Enang, E. R. (2015). IFRS adoption and value relevance of financial statements of Nigerian listed banks. International journal of finance and accounting, 4(1), 1-7.
Uyar, M. (2013). The Impact of Switching Standard on Accounting Quality. Journal of Modern Accounting and Auditing, 9(4), 459-479.
Vishnani, S., & Shah, B. (2008). International differences in the relation between financial reporting decisions and value relevance of published financial statements-with special emphasis on impact of cash flow reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Watts, L., & Zimmerman, J. L. (1986). Positive Accounting Theory.
Zamri, N., Rahman, R. A., & Isa, N. S. M. (2013). The impact of leverage on real earnings management. Procedia Economics and Finance, 7, 86-95.
Published
2020-09-16
How to Cite
Amankwa, R. F., Mawutor, J. K. M., & Yiadom, E. B. (2020). A Panel Examination of IFRS Adoption and Financial Statement Quality: Evidence from Selected Firms in Ghana. International Journal of Accounting & Finance Review, 5(2), 45-53. https://doi.org/10.46281/ijafr.v5i2.768
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2020 Richard Fosu Amankwa, John Kweku Mensah Mawutor, Eric Boachie Yiadom
This work is licensed under a Creative Commons Attribution 4.0 International License.
