Article2013

Effects of IFRS Adoption on Tax-induced Incentives for Financial Earnings Management: Evidence from Greece

Nikolaos I. Karampinis · Dimosthenis L. Hevas

62 citations0/0 files storedThe International Journal of Accounting

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Auditing, Earnings Management, Governance Corporate Taxation and Avoidance Corporate Governance and Financial Management

Abstract

We investigate whether the adoption of International Financial Reporting Standards (IFRS) in Greece affected tax-induced incentives for financial earnings management. Prior to the implementation of IFRS, there were powerful incentives for firms facing higher tax pressure to restrict (exacerbate) upward (downward) financial earnings management due to direct tax implications. IFRS adoption reduced book–tax conformity, thereby releasing financial income from tax implications. As expected, we find that tax pressure is a significant negative determinant of discretionary accruals in the pre-IFRS period. However, this effect dissipates under the new IFRS regime.

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References

2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 1997Legal Determinants of External Finance 1991Earnings Management During Import Relief Investigations 2005Performance matched discretionary accrual measures 1995Detecting Earnings Management.1985Positive Accounting Theory 2003Earnings management and investor protection: an international comparison 1997Earnings management to avoid earnings decreases and losses

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