The effect of international financial reporting standards adoption on the earnings management of oil companies which are experiencing oil price decline shock

This study analyses impact of IFRS adoption on oil companies' accrual and real earnings management considering moderation effect of world crude oil price decline shock. We study 96 oil firms or 445 firms-years on 13 countries from 2012 until 2016. Our result shows that the shock has intensified income-decreasing accrual earnings management practice because of increase on investors' tolerance toward loss. However, the result suggests that firms efficiency on discretionary expenses and overproduction strategy of OPEC countries after 2014 increase real earnings management level of samples (showing decrease in income-decreasing real earnings management). This study also finds IFRS adoption has no impact on accrual and real earnings management of oil companies alleged because of political cost pressure. Finally, this study finds the shock has no moderation effect on IFRS adoption and earnings management relation.