Does IFRS adoption impacts earnings management? Evidence of Brazilian Capital Market
Name: VITOR CORREA DA SILVA
Publication date: 25/09/2015
Advisor:
Name |
Role |
|---|---|
| ANNOR DA SILVA JUNIOR | Advisor * |
Examining board:
| Name |
Role |
|---|---|
| ANNOR DA SILVA JUNIOR | Advisor * |
| PATRÍCIA MARIA BORTOLON | Internal Examiner * |
Summary: This dissertation aimed to identify the impact of the IFRS adoption on earnings
management (proxy for the earnings quality - EQ) of non-financial Brazilian companies
on the Brazilian Securities, Commodities and Futures Exchange (Bolsa de Valores,
Mercadorias e Futuros de São Paulo - BM&FBOVESPA). In reviewing the literature
on the issue, it was found that: (1) there is a gap in the investigation of earnings
management in Brazil, since most of the studies focuses on earnings management by
discretionary accruals, there are few studies on earnings management by operational
manipulations, as well as studies on both earnings management forms (MARTINEZ,
2013) and; (2) the earnings quality (EQ) is not only influenced by accounting standards,
but by at least three distinct factors: i) the legal and political environment in which
companies operate, ii) the accounting standards and; iii) internal incentives of the
companies for the disclosure of accounting information, being the first factor more
relevant than the others two, including by also influence them (SODERSTROM, SUN,
2007). Thus, it chose to measure both forms of earnings management and analyze the
impact on them of three variables that are expected to capture the effects of the three
factors that impact the EQ, they are: i) the additional regulation of some sectors of the
economy (first factor); ii) IFRS (second factor) and; iii) the presence of companies in
the special segment of BM&FBOVESPA listing (third factor). It is believed that this
approach which assesses the IFRS together with other factors that impact the EQ allow
a more comprehensive analysis on the possible impact of the IFRS on earnings
management. The population of interest of the research was the non-financial public
companies of BM&FBOVESPA and the sample, collected from the Comdinheiro tool,
included 1,619 firm/year observations for models of discretionary accruals and 1,592
firm/year observations for models of operational manipulations. In order to implement
the research were carried out six regression analyzes with White robust correction for
panel data with random effects, each regression had as a dependent variable a different
metric for earnings management of companies, and three sought to capture the
discretionary accruals and three other the operational manipulations. The results suggest
that IFRS had no impact on earnings management practices, either discretionary
accruals or operational manipulations. The presence in regulated sectors, however, tends
to have a restriction on the use of earnings management by discretionary accruals in
companies, however, does not impact on earnings management by operational
manipulations. Regarding the presence in the special segment of BM&FBOVESPA
listing, the results suggest that in recent years, when the accounting standard was
already IFRS, companies present in these segments had lower absolute values of
discretionary accruals and operating manipulations. It is concluded that the IFRS were
not able to decrease the earnings management in Brazil possibly due to poor Brazilian
institutional environment (LOPES; WALKER, 2008), showing even a formalistic aspect
which is characterized by the difference between the practical reality and Legal proposal
planned for this reality (RIGGS, 1964, 1968). Also contributing to the literature in
Brazil, the results suggest that both forms of earnings management are affected by
different phenomena because they have different incentives and costs and, therefore,
should not be treated as if they respond to the same incentives.
