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International Financial Reporting Standards and Earnings Quality: The Case of Listed Firms in Saudi Arabia

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Regulation of Finance and Accounting (ACFA 2021, ACFA 2020)

Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

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Abstract

This chapter aims at testing empirically the impact of the IFRS adoption on the earnings quality in, one of the MENA region countries, the emerging market of Saudi Arabia. For this end, three models were developed each representing an earning quality metric: (a) earnings smoothing, (b) management earnings toward targets, and (c) timely loss recognition. After setting the descriptive statistics of the dependent and control variables, performing a Pearson correlation matrix, and estimating regression equations, results indicated that earnings smoothing was the only significant metric and that has increased after the IFRS adoption. This increase implies a decrease in earnings quality. However, our results failed to find any supporting evidence concerning the improvement of neither managing earnings toward a target nor timely loss recognition. Consequently, it can be concluded that the overall earnings quality of listed firms in Saudi Arabia was not found to have improved after the introduction of the International Financial Reporting Standards.

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Acknowledgments

The chapter has been prepared within the research project “The determinants of accounting quality in emerging and transitioning economies” (OP RDE IGA/A, CZ.02.2.69/0.0/0.0/19_073/0016936, project no. 15/2021).

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Authors and Affiliations

  1. Department of Financial Accounting and Auditing, Prague University of Economics and Business, Prague, Czech Republic

    Sarah Chehade

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  1. Sarah Chehade
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Correspondence to Sarah Chehade .

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  1. Faculty of Finance & Accounting, Prague University of Economics and Business, Prague, Czech Republic

    David Procházka

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Chehade, S. (2022). International Financial Reporting Standards and Earnings Quality: The Case of Listed Firms in Saudi Arabia. In: Procházka, D. (eds) Regulation of Finance and Accounting. ACFA ACFA 2021 2020. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-99873-8_22

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