The Impact of Transition to IFRS on the Quality of Earnings Reported by Romanian Listed Companies
Author:
Assistant Mihai CARP Ph.D.
JEL:
G30, L25, M41
DOI:
Keywords:
quality of the financial information, IFRS, earnings management, discretionary accruals, regression analysis
Abstract:
Providing quality financial information, which would help limiting the uncertainties associated with decision making concerning investments, is a determining factor for the development of an efficient capital market. \r\nThis paper aims to analyze the impact generated by the mandatory application of IFRS by companies whose securities are allowed for transactions on the regulated section of the Romanian Stock Exchange market, on the neutrality of the financial information, evaluated through the dimension of earnings management. By correlating the data corresponding to the elements that form the selected sample, a database was created, which allows analyzing the phenomenon over a five-year time horizon, respectively for the financial years 2009 – 2013. This allowed performing 248 observations on the 62 companies quoted on the main segment of the Bucharest Stock Exchange. By using the econometric models consecrated in specialized literature, based on the correlation analysis and on the multiple regression analysis, such as Jones (1991) and Dechow et al. (1995), it was possible to estimate the levels of non-discretionary accruals (NA) and of discretionary accruals (DA), the latter reflecting the level of manipulations present in the process of reporting of the financial results. Also, some processing was performed in order to adapt the econometric models used to the specific conditions of the Romanian economic environment, by introducing additional control variables, such as: the degree of indebtedness, the dimension, and respectively the performance of the activity of the quoted companies.\r\n\r\n