IFRSs Adoption and Earnings Management, Earnings Persistence, and Value Relevance: Evidence from Selected Telecommunication Companies of Saudi Arabia

Abstract

The focus of this research is to see if the quality of financial data from Saudi telecommunication companies has improved since the adoption of International Financial Reporting Standards (IFRSs) in 2017. The study assesses financial reporting quality using three metrics: Earnings Management, Earnings Persistence, and Value Relevance. The financial data was gathered over the previous ten years, which were divided into two periods: pre-adoption of IFRSs (2012–2016) and post-adoption of IFRSs (2017-present) (2017–2021). These figures were compiled from a variety of sources, including annual reports from selected companies and other websites. In this study, regression analysis was used to investigate the quality of financial information using Earnings Management, Earnings Persistence, and Value Relevance. According to the findings of this study, there was an improvement in the quality of financial reporting in Saudi Arabia following the mandatory adoption of IFRSs. In the post-IFRSs period, this study discovered an increase in Earnings Persistence and greater Value Relevance in the reported financials of selected Saudi telecommunication firms, indicating improved earnings quality. The study’s findings, however, showed no evidence of improved financial reporting quality in the Earnings Management dimension. The findings will be used in future studies to better understand the benefits of adopting International Financial Reporting Standards (IFRSs). This research would also help regulators emphasise the importance of adopting IFRS as soon as possible. Because this study only used three criteria, Earnings Management, Earnings Persistence, and Value Relevance, it is suggested that other metrics be used to assess the effectiveness of presented financials.