Abstract
This study investigates the differences in earnings quality of Malaysian companies after the adoption of IFRS-based accounting standards named FRS. We hypothesize that under the new set of accounting standards, the quality of earnings reported by these companies is relatively higher. We measure earnings quality using two different proxies; the absolute value of abnormal accruals and the value relevance of earnings. Using 4010 observations over a three-year period before and a three-year period after the adoption of the new set of accounting standards, our study finds that the adoption of FRS is relatively related to higher reported earnings quality. Specifically, the results shows that (1) the absolute value of abnormal accrual is significantly lower and (2) the value-relevance of firms earnings is significantly higher, after the adoption of the new set of accounting standards.
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