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Unintended effects of IFRS adoption on earnings management: The case of Latin America

Samuel Mongrut and Diego Winkelried ()

Emerging Markets Review, 2019, vol. 38, issue C, 377-388

Abstract: We study the determinants of earnings opacity in the six largest Latin American economies (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), in particular the effects of adopting IFRS. Using panel data on 871 listed firms during the period 2000 to 2016, we find that in Latin America the adoption of IFRS caused firms to substitute high quality audit practices with the newly imposed regulation, to the extent that its effect on the degree of opacity in the region became unintendedly positive. The results hold after a number of robustness checks. Thus, we provide compelling evidence against the belief that the mere adoption of the IFRS is sufficient to guarantee transparency in emerging markets.

Keywords: Earnings management; Audit quality; Accounting regulation; Policy effects (search for similar items in EconPapers)
JEL-codes: G30 M48 O54 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:ememar:v:38:y:2019:i:c:p:377-388