The Impact of IFRS Adoption on Real Activities Manipulation: Evidence from China

The Impact of IFRS Adoption on Real Activities Manipulation: Evidence from China.

Chan Lyu1 Yuen, Desmond C. Y.2 Xu Zhang2 Nini Zhang2

Journal of Applied Management Accounting Research. Summer2014, Vol. 12 Issue 2, p17-39. 23p. 1 Diagram, 9 Charts, 1 Graph.


This paper studies the relationship between IFRS adoption and real activities manipulation, and investigates whether IFRS reduces earnings management and improves the quality of accounting information. As China steps into the era of IFRS (International Financial Reporting Standard) adoption, it is important to focus on this issue and its implementation in such emerging markets. The paper finds that real earnings management is primarily driven by abnormal production costs, and that more companies manipulate earnings through operational transactions after IFRS adoption. Our findings suggest that real activities manipulation is positively related with IFRS implementation, and that such an association is stronger for real estate firms, especially in the case of abnormal cash flows of operations.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s