Do Accounting Standards Influence the Level of Earnings Management? Evidence from Germany

29 Pages Posted: 26 Mar 2003

See all articles by Igor Goncharov

Igor Goncharov

Lancaster University - Department of Accounting and Finance

Jochen Zimmermann

University of Bremen - Faculty of Business Studies and Economics; University of Bremen - Chair of Accounting and Control

Date Written: December 2006

Abstract

German firms were allowed to present consolidated accounts prepared under German GAAP, IAS or US GAAP. The article analyses whether the level of earnings management differs between the standards. While the manipulation under German GAAP and IAS is roughly the same, we find significantly lower levels of earnings management for the firms that report their results under US GAAP. This is consistent with an interpretation that a different amount of accounting choices embedded in different accounting standards influences the level of earnings management. Our results hold for various proxies of earnings management and after controlling for factors influencing the adoption of the standards. As there is no evidence for self-selection driving the results, this is an indication for a superior quality of US earnings in comparison to German GAAP or even IAS.

Keywords: earnings management, reporting incentives, international accounting standards

JEL Classification: M41, M47

Suggested Citation

Goncharov, Igor and Zimmermann, Jochen, Do Accounting Standards Influence the Level of Earnings Management? Evidence from Germany (December 2006). Available at SSRN: https://ssrn.com/abstract=386521 or http://dx.doi.org/10.2139/ssrn.386521

Igor Goncharov (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

Jochen Zimmermann

University of Bremen - Faculty of Business Studies and Economics ( email )

Hochschulring 4
Germany
+49 421 218 9121 (Phone)

University of Bremen - Chair of Accounting and Control ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany
+49 421 218-9119 (Phone)

HOME PAGE: http://www.controlling.uni-bremen.de

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