Earnings Management and Local vs. International Accounting Standards of European Public Firms

52 Pages Posted: 3 Dec 2008 Last revised: 1 Jun 2009

See all articles by Wolfgang Aussenegg

Wolfgang Aussenegg

Vienna University of Technology

Petra Inwinkl

Jönköping International Business School

Georg Thomas Schneider

University of Graz

Date Written: September 1, 2008

Abstract

We examine how the transition from local GAAPs to IAS/IFRS of companies that are publicly traded on a European stock exchange affects earnings management. To measure earnings management we apply 15 different proxies. In analyzing 17 European countries and more than 18,000 firm-year observations we observe that companies applying IAS/IFRS experience less earnings management than firms applying domestic standards. However, while this is true for Central European countries, UK and Ireland (English legal origin) as well as Northern European Countries (Scandinavian legal origin) show a different behavior. They already have lower earnings management levels prior to IAS/IFRS adoption compared to the rest of Europe. For these countries the transition from local GAAPs to IAS/IFRS does not change their earnings management behavior. Apart from this, we show that firm size and time have no significant effect on earnings management and that growth firms exhibit higher levels of earnings management. In comparing the results for all 15 earnings management measures we conclude that different measures seem to capture different dimensions of earnings management.

JEL Classification: M41, M43, M44, M47

Suggested Citation

Aussenegg, Wolfgang and Inwinkl, Petra and Schneider, Georg Thomas, Earnings Management and Local vs. International Accounting Standards of European Public Firms (September 1, 2008). Available at SSRN: https://ssrn.com/abstract=1310346 or http://dx.doi.org/10.2139/ssrn.1310346

Wolfgang Aussenegg (Contact Author)

Vienna University of Technology ( email )

Theresianumgasse 27
Vienna, A-1040
Austria
+43 1 58801 33082 (Phone)
+43 1 58801 33098 (Fax)

HOME PAGE: http://www.imw.tuwien.ac.at/fc/people/wolfgang_aussenegg/

Petra Inwinkl

Jönköping International Business School ( email )

Gjuterigatan 5
SE 551 11
Sweden
+43 1 58801 33084 (Phone)
+43 1 58801 9 33084 (Fax)

Georg Thomas Schneider

University of Graz ( email )

Universitätsstrasse 15/G1
Graz, 8010
Austria

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