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Leadership, Innovation and Entrepreneurship as Driving Forces of the Global Economy pp 411–422Cite as

The Effect of International Accounting Standards on Management Behavior: A Study on Earnings Management Behavior in Countries with High Investor Protection

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Abstract

The objective of this study is to examine the effect of the international financial reporting standards (IFRS) implementation on earnings management behavior in countries with high investor protection and strong legal enforcement. It does this by looking at a sample of 199 public listed companies from seven selected countries over a period of 15 years (before and after IFRS adoption). The results of this study suggest that in high investor protection countries, earnings management in general and accrual-based earnings management (AEM) in particular are more implemented during the IFRS application period than during the national generally accepted accounting principles (GAAP) application period. The study also suggests that earnings reports are more manipulated when firms face financial distress. However, it does not have enough evidence to conclude that real earnings management (REM) is more or less practiced after the transition to IFRS and whether there is a substitutional relationship between REM and AEM.

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Notes

  1. 1.

    A period of 15 years (2000–2014) was observed. However, the calculations in the measurements of this study were based on lagged values, depending on how the formulas are structured; the observed period could be reduced to 14 years (2001–2014 for AEM measurements) or 13 years (2002–2014 for REM measurements).

  2. 2.

    Reuters, Three top economists agree 2009 worst financial crisis since Great Depression; Risks increase if right steps are not taken. Available from: http://www.reuters.com/article/2009/02/27/idUS193520+27-Feb-2009+BW20090227 (27 Feb 2009).

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Author information

Authors and Affiliations

  1. International Business Department, University of Applied Sciences Worms, Erenburger Str. 19, 67549, Worms, Germany

    Benno Feldmann & Tiet Khanh Le

Authors
  1. Benno Feldmann
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  2. Tiet Khanh Le
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Correspondence to Benno Feldmann .

Editor information

Editors and Affiliations

  1. Lakehead University, Thunder Bay, Ontario, Canada

    Rachid Benlamri

  2. Mailman School of Public Health, Columbia University, New York, New York, USA

    Michael Sparer

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Feldmann, B., Le, T.K. (2017). The Effect of International Accounting Standards on Management Behavior: A Study on Earnings Management Behavior in Countries with High Investor Protection. In: Benlamri, R., Sparer, M. (eds) Leadership, Innovation and Entrepreneurship as Driving Forces of the Global Economy. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-43434-6_35

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