Title: The effect of International Financial Reporting Standards adoption on the earnings management of oil companies which are experiencing oil price decline shock

Authors: Bintang Yosua Ronibasa; Sylvia Veronica Siregar

Addresses: Department of Accounting, Universitas Indonesia, Depok, West Java, Indonesia ' Department of Accounting, Universitas Indonesia, Depok, West Java, Indonesia

Abstract: This study analyses impact of IFRS adoption on oil companies' accrual and real earnings management considering moderation effect of world crude oil price decline shock. We study 96 oil firms or 445 firms-years on 13 countries from 2012 until 2016. Our result shows that the shock has intensified income-decreasing accrual earnings management practice because of increase on investors' tolerance toward loss. However, the result suggests that firms efficiency on discretionary expenses and overproduction strategy of OPEC countries after 2014 increase real earnings management level of samples (showing decrease in income-decreasing real earnings management). This study also finds IFRS adoption has no impact on accrual and real earnings management of oil companies alleged because of political cost pressure. Finally, this study finds the shock has no moderation effect on IFRS adoption and earnings management relation.

Keywords: earnings management; oil industry; aggressive; oil price decline shock; International Financial Reporting Standards; IFRS.

DOI: 10.1504/IJBG.2020.109824

International Journal of Business and Globalisation, 2020 Vol.26 No.1/2, pp.71 - 91

Received: 01 Oct 2018
Accepted: 03 May 2019
Published online: 25 Sep 2020 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article