臺大管理論叢 NTU Management Review VOL.30 NO.2

The Effects of Relaxing the Reconciliation Requirement in Foreign Private Issuers’ SEC Filings on Earnings Management Strategies: IFRS Adopters versus U.S. GAAPAdopters 120 The combined evidence in Table 7 reveals that earnings management strategies (i.e., discretionary accruals and real activities manipulation) play different roles in firms that adopt IFRS voluntarily prior to the regulatory change and maintain their filing choice afterward, those that switch to IFRS voluntarily after the elimination, those that apply domestic standards after the elimination, and those that domicile in countries that adopt IFRS on a mandatory basis, if ranked by the order of most positive (or least negative) to least positive (or most negative) income effect. These results probably explain why prior studies observe lower audit fees for non-U.S. cross-listed firms that use IFRS to prepare their financial reports after the change (see Lin and Huang, 2017). Our findings also reinforce prior studies, including Barth et al. (2012) and Christensen et al. (2015). They both document that voluntary and mandatory IFRS adopters exhibit significant differences in accounting quality. For robustness check, we re-estimate the simultaneous equations (6) and (7) for our mandatory IFRS sample. Table 8 indicates that the coefficients on all of the earnings management variables, except DA it ( RM_DISX it ) in the RM_DISX it ( DA it ) equation, are all negative and significant at p = 1%. We use Hausman (1978) test for contemporaneous correlation between the error term and discretionary accruals/real activities manipulation, and we reject the null of no endogeneity at the p = 10% significance level or better across all the models except for the DA it and RM_DISX it equations in columns (v) and (vi) of Table 8. Taken together, the results show evidence of simultaneity and substitution between abnormal accruals and inventory overproduction for firms that are required to use IFRS by their home jurisdiction. However, in contrast to those for firms that adopted IFRS voluntarily before or after the reconciliation elimination, the findings from the additional analysis reveals that mandatory IFRS adopters do not manage earnings through abnormal accruals and discretional expenditures simultaneously. The results provide additional evidence that the earnings management strategies of mandatory IFRS adopters differ from those of voluntary IFRS firms.