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Article
Financial Crisis and Earnings Management under U.S. GAAP and IFRS
Review of Pacific Basin Financial Markets and Policies
  • Thanyaluk Vichitsarawong
  • LiLi Eng, Missouri University of Science and Technology
Abstract

This paper examines the effects of the global financial crisis of 2008 on real and accrual-based earnings management activities of foreign companies listed in the United States as American Depositary Receipts (ADRs). The ADR firms are classified according to whether they report under U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Accrual-based earnings management is measured using the absolute value of performance-matched discretionary accruals. We also use the positive and negative values of performance-matched discretionary accruals to examine income-increasing and income-decreasing earnings management, respectively. Real earnings management proxies are measured using performance-matched measures of the abnormal levels of cash flow from operations, production costs, and discretionary expenses. In summary, our findings indicate no difference in accrual-based earnings management for ADRs reporting under IFRS and U.S. GAAP but suggest that ADRs reporting under IFRS are more likely to manage earnings using income-decreasing discretionary accruals and aggregate real earnings management than ADRs reporting under U.S. GAAP during the financial crisis.

Department(s)
Business and Information Technology
Keywords and Phrases
  • Accruals,
  • Global Financial Crisis,
  • IFRS,
  • Real Earnings Management,
  • U.S. GAAP
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2020 World Scientific Publishing Co., All rights reserved.
Publication Date
6-1-2020
Publication Date
01 Jun 2020
Disciplines
Citation Information
Thanyaluk Vichitsarawong and LiLi Eng. "Financial Crisis and Earnings Management under U.S. GAAP and IFRS" Review of Pacific Basin Financial Markets and Policies Vol. 23 Iss. 2 (2020) ISSN: 0219-0915
Available at: http://works.bepress.com/lili-eng/50/