The impact of mandatory IFRS adoption on earnings management in Malaysia

This study investigates whether the impact of mandatory adoption of international accounting standards, IFRS, by Malaysian listed companies is associated with lower earnings management from 2009 to 2014. Earnings management is identified using absolute value of abnormal accruals, measured by ABACDEC and ABACKAS. By using Ordinary Least Squares Regression (OLS) and fixed effects estimation, the result of this study concludes that Malaysian listed companies engage in more earnings management after IFRS adoption. This study also investigates whether size (ASSET), profitability (ROA) and leverage (LDEBTA) influence the level of earnings management in Malaysian listed companies. The result shows that ASSET has a negative relationship with ABACDEC and ABACKAS, implying that larger companies engage in less earnings management as compared to smaller companies. In the aspect of leverage, the results indicate that LDEBTA has a positive relationship with the ABACDEC and ABACKAS, demonstrating that high leverage companies engage in more earnings managements. Finally, ROA has a positive relationship with ABACDEC and ABACKAS, demonstrating that in Malaysia, more profitable companies involve in more earnings managemen