International Financial Reporting Standards, Earning Management and Operational Activities: A Cross Countries Empirical Evidences

Abstract

This research mainly focused on the association between the international financial reporting standards and earning management on the pharmaceutical firms of cross countries that is Brazil, Russia, China, India, and South Africa. Sample population consists of three pharmaceuticals firms of 5 BRICS countries and data collection was done through annual report of these countries. In statistical analysis to draw conclusions the analytical tool such as Panel regression analysis were used. Main objective of the study, to examine the influence of international financial reporting standards on accrual based earning management. And To investigate that which country are mostly involved in earning management after international financial reporting standards adoption. For this purpose five independent variables have been used to demonstrate the impact of IFRS on earning management. by using extended modified jones model to detect accrual based earning management These seven independent variables are change in revenue, change in receivables, change in payable, change in expenses, deprecation, pen expenses and international financial reporting standards is used as a time dummy variable from period of 2007 to 2013. Data period is from 2007-2013.this study use secondary data type which is collected through annual reports of the selected pharmaceuticals firms of the countries in which firms are belong. Finding of the result shows that IFRS has significant impact on earning management. Finding of this study also reveals that South Africa is more involved in earning management as compare to other selected cross countries. And accrual based earning management has positively influence after IFRS convergence. This study has also got some limitations as like many other studies. This study has two main limitations; first one is that the population sample being deployed for this study is limited to six years, which is determined by the limited amount of available data from the research information based. Secondly we only focus on pharmaceutical firms because extended modified jones model is only used in case of manufacturing firms. Thirdly this study only specific to the accrual based earning management. This research is only limited to the manufacturing firms because the model is used for this research only used form manufacturing firms, Impact of IFRS on Earning management should be tested on Banking sector.