THE IMPACT OF IFRS ADOPTION ON EARNING MANAGEMENT AND MARKET VALUE: A COMPARISON STUDY OF SAUDI LISTED COMPANIES (2012-2022)

Abstract

This study examined the impact of International Financial Reporting Standards (IFRS) adoption on earnings management and market values of Saudi companies listed on the Saudi Stock Exchange (Tadawul). The study used descriptive statistics, correlation analysis, and comparative analysis of sampled companies five years before IFRS adoption and five years after (2012 up to 2022) to estimate the results. The study population is non-financial companies listed on the Saudi stock exchange market. A sample of 188 companies was selected from 270 non-financial listed companies, representing 70%. The study revealed that there are still contradictory results concerning the relationship between accounting rules and the level of earnings management. The result implies that IFRS have created an environment that mitigates earnings management practices in favor of better quality of performance. It also supports the prediction of the accrual model that earnings management incentives are stronger under local accounting standards than under IFRS, acting as a moderator for reducing earnings management among global companies. These results deny the concerns that had been raised by some market participants suggesting that IFRS would lead to increased earnings management.