THE EFFECT OF ADOPTION-IFRS ON ACCRUALS-BASED EARNINGS MANAGEMENT: CASE OF SAUDI LISTED FIRMS

Abstract

This study examines the effect of International Financial Reporting Standards (IFRS) adoption on accruals-based earnings management in non-financial listed firms in Saudi stock exchange. The study uses a sample of 86 non-financial firms for a period of four years (2015 to 2018), which was two years before (2015 – 2016) and two years after (2015 – 2016) the adoption of the IFRS to measure the effects of the IFRS on earnings management. The study used discretionary accruals as a proxy of earnings management and use the regression model analysis to run the research’s data. The findings of the study indicate that earnings management is influenced by the adoption of the IFRS. More specifically it is associated with lower incidents of accruals-based earnings management in Saudi listed firms. Empirically, the findings support the research questions, hypothesis and prior studies, which revealed that there is a significant correlation between the IFRS and accruals-based earnings management.