The Accruals and Real Earnings Management Behavior: Evidence from the IFRS Adoption in Thailand

• In Event: Earnings Management: International Evidence II

Abstract

This study examines the accrual and real earnings management (AEM and REM) behavior in Thailand before and after the IFRSs adoption in order to determine changes in the behavior. The sample contains 2,206 Thai listed firm-year observations during the period from 2006 to 2013. Using the t-test and the cluster analysis, the results show that there is a statistically significant difference of AEM between the pre- and post-IFRS adoption period whereas no such change in REM, suggesting that after the IFRS adoption Thai companies tend to employ accruals to manage upward earnings. The cluster analysis also shows that in Thai companies, earnings management behaviors can be categorized into 4 clusters: the “normal” cluster, the “upward AEM” cluster, the “upward REM” cluster, and the “downward” cluster. The results provide empirical evidence for practitioners and regulators to be aware of the consequence of the IFRSs adoption and carefully analyze Thai financial reports as AEM behaviors tend to increase.

Authors

• Napaporn Likitwongkajon, Khon Kaen University

• Siriluck Sutthachai, Khon Kaen University