UM E-Theses Collection (澳門大學電子學位論文庫)

check Full Text

The impact of IFRS adoption on real activities manipulation : empirical evidence from Chinese domestically listed companies

English Abstract

Since China steps into the era of International Financial Reporting Standard (IFRS), more and more accounting academic papers focus on this issue and its implementation in this emerging market. Following this trend, I study the relationship between IFRS adoption and real activities manipulation to investigate whether IFRS reduce earnings management to improve the quality of accounting information. In 2007, all public listed firms in China are forced to adopt new Chinese Accounting Standards (new CAS), which is largely IFRS-convergent General Accepted Accounting Principle (GAAP) and could be seen as IFRS. Therefore, I examined real activities manipulation from 2002 to 2011 with all Chinese domestically listed companies (excluding utilities and financial industries) binding to prepared financial statements under new standards. I measured abnormal level of CFO (Cash Flow of Operation), abnormal level of production cost and abnormal level of discretionary expenses to capture the real activities manipulations. It was discovered that real earnings management is primarily driven by abnormal production cost. The empirical results generally indicate that real activities manipulation is positively related with IFRS implementation, i.e. IFRS adoption triggered more companies to manipulate earnings through operational transactions. Such association is stronger for real estate’s firms, especially in abnormal CFO. Through the investigation of China, my study illustrates that firms tend to smooth earnings through real operational transactions after the mandatory adoption of IFRS. My findings points to the need for deeper consideration of IFRS adoption in China. As the increase of real activities manipulation may neutralize the positive effect of IFRS on accrual-based earnings management.

Issue date



Lin, Xiao Jun


Faculty of Business Administration


Department of Accounting and Information Management


M. Sc.


International financial reporting standards

Accounting -- Standards -- China

Corporations -- China

Files In This Item

Full-text (Intranet only)

1/F Zone C
Library URL