The Adoption Of IFRS And Earnings Management: Evidence From The Construction Industry In Malaysia | SEKOLAH PERNIAGAAN DAN EKONOMI UPM
» The Adoption Of IFRS And Earnings Management: Evidence From The Construction Industry In Malaysia

The Adoption Of IFRS And Earnings Management: Evidence From The Construction Industry In Malaysia

by Wan Razazila Wan Abdullah*, Enny Nurdin Sutan Maruhun, Masetah Ahmad Tarmizi
Universiti Teknologi MARA, Malaysia
Full Text: Link

Abstract

This study examines the effects of IFRS adoption on the quality of financial reporting (proxies by the level of earnings management) in Malaysia.  The study measures the quality of Malaysian Construction companies through discretionary accruals yielded from 2008 to 2016.  The sample comprises a balanced panel of 810 firm-year observations of Construction firms under the Main Board of Bursa Malaysia.  This study accesses the effectiveness of effort by the Malaysian Accounting Standard Board (MASB) to improve the financial reporting by the revision process of the standard and their mandatory application.  The accounting standard in Malaysia has closely followed the former International Accounting Standards (IAS) which is currently known as the International Financial Reporting Standard (IFRS).  In November 2011, the Malaysian Accounting Standard Board (MASB) has issued the implementation of the Malaysian Financial Reporting Standard (MFRS).  The full convergence is effective starting from 1st January 2012.  One of the standards of MFRS 111 Construction Contracts focuses on construction companies.  The construction industries have special financial reporting standards due to their unique features and the nature of their business activities.  Therefore, this study is to examine the level of earnings management of Malaysian Construction companies during the period before the adoption of IFRS and the period after the adoption.  The results show that there is a significant difference between the level of earnings management during the years before the adoption of IFRS and after the adoption of IFRS in Malaysia.  This suggests that Malaysian construction companies have higher accounting qualities after the adoption period as compared to the period before the adoption of IFRS.  Thus, the results of this study are expected to provide early evidence of the impact of adopting IFRS and give further direction for the regulatory bodies regarding the accounting standards and financial reporting practices in Malaysia.  Future research perhaps could analyze the relationship of the characteristics of corporate governance in mitigating earnings management especially for the construction industries.

Keywords: Earnings management, financial reporting standards, earnings quality

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kemaskini:: 27/06/2022 [syazmer]

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