Abstract
The purpose of this study is to investigate the effect of International Financial Reporting Standards (IFRS) adopting on earning management by considering the role of board size and board independence. Univariate tests and multivariate regression analysis were employed to test whether the level of earnings management is significantly lower after the adoption of IFRS and whether the role of board size and board independence on constraining the earnings managements is higher after IFRS adoption for a sample of Chinese listed companies during the period 2003 to 2013 except 2007 over a four-year period before and a six-year period after the adoption of IFRS. The empirical results show that earning management increased after the adoption of IFRS. However, there is no relationship between board size and earnings management before and after the adoption of IFRS but board independence has significantly decreased the earning management after the adoption of IFRS in China. The findings of this study have important implications for policymakers, auditors, multinational firms, and users of financial reports. As the rapid growth of China's economy gains global recognition, the Chinese stock market is capturing the attention of international investor. Key words: Earning management, International Financial Reporting Standards (IFRS), board size, board independence.
Highlights
East Asia, Europe, and the US have experienced financial scandals that have decreased the confidence of investors in the integrity of accounting information
The third hypothesis is supported through the results in Table 4 as the results show that after International Financial Reporting Standards (IFRS) adoption, the earnings management can be effectively decreased through board independence; the same results do not prove the second hypothesis which theorises that the earnings management would be affected by the board size after IFRS adoption
This research has evaluated the effects of IFRS adoption on earnings management by considering the role of board size and board independence for a sample of listed firms in China from 2003 to 2013
Summary
East Asia, Europe, and the US have experienced financial scandals that have decreased the confidence of investors in the integrity of accounting information. The International Accounting Standards Board (IASB) is devoted to developing a single set of high-quality global accounting standards which requires comparable and transparent information in the overall function of financial statements (www.iasb.org).
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