Financial Crisis and Earnings Management Under U.S. GAAP and IFRS

Thanyaluk Vichitsarawong and Li Li Eng ()
Additional contact information
Thanyaluk Vichitsarawong: Chulalongkorn Business School, Chulalongkorn University, Bangkok 10330, Thailand
Li Li Eng: Department of Business and Information Technology, Missouri University of Science and Technology, Fulton Hall, Rolla, MO 65401, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2020, vol. 23, issue 02, 1-28

Abstract: This paper examines the effects of the global financial crisis of 2008 on real and accrual-based earnings management activities of foreign companies listed in the United States as American Depositary Receipts (ADRs). The ADR firms are classified according to whether they report under U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Accrual-based earnings management is measured using the absolute value of performance-matched discretionary accruals. We also use the positive and negative values of performance-matched discretionary accruals to examine income-increasing and income-decreasing earnings management, respectively. Real earnings management proxies are measured using performance-matched measures of the abnormal levels of cash flow from operations, production costs, and discretionary expenses. In summary, our findings indicate no difference in accrual-based earnings management for ADRs reporting under IFRS and U.S. GAAP but suggest that ADRs reporting under IFRS are more likely to manage earnings using income-decreasing discretionary accruals and aggregate real earnings management than ADRs reporting under U.S. GAAP during the financial crisis.

Keywords: Global financial crisis; real earnings management; accruals; U.S. GAAP; IFRS (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091520500150
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:23:y:2020:i:02:n:s0219091520500150

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091520500150

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().