Expert and politically connected CEOs and earnings quality: does IFRS adoption matter?

H. M. Arif, Azlina Abdul Jalil and Mohd Zulkhairi Mustapha

Accounting Research Journal, 2025, vol. 38, issue 5-6, 609-629

Abstract: PurposeThe purpose of this study is to investigate the moderating effect of the mandatory application of the International Financial Reporting Standards (IFRS) on the association between experts and politically connected chief executive officers (CEOs) and earnings quality.Design/methodology/approachThis study used 10-year panel data from 165 publicly listed companies in Bangladesh from 2010 to 2019. Fixed effects, the generalised method of moments and propensity score matching (PSM) were used for estimation.FindingsThe evidence suggested that mandatory IFRS adoption positively moderated the adverse effects of expert or politically connected CEOs on accrual earnings quality. Although mandatory IFRS adoption was effective in curbing real earnings management practices among expert CEOs, it did not mitigate politically connected CEOs’ use of real earnings management.Practical implicationsThis study identified key areas for enhancing the effective implementation of IFRS. Findings on the behaviour of expert and politically connected CEOs offer practical guidance for regulators, investors, auditors and board directors to support more informed decision-making processes.Originality/valueThis study is among the limited number of investigations that have explored the moderating effect of mandatory IFRS adoption on the opportunistic behaviour of politically connected and expert CEOs. This paper addresses concerns about opportunistic behaviour in emerging economies, offering valuable insights into this critical issue.

Keywords: IFRS adoption; Earnings quality; CEO expertise; CEO political links (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-07-2024-0251

DOI: 10.1108/ARJ-07-2024-0251

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