The Relationship between Accounting Comparability and Earnings Management Practices under IFRS: An Empirical Study for Egyptian Firms listed on Egy

Purpose: This research aims to investigate the causality relationship between accounting comparability (AC) and earnings management (EM) practices through accruals, and real activities during pre-post (IFRS) adoption, by using a sample of (154) non-financial firms, with (2156) observations during the period from 2009 to 2022.
Design/Methodology: The researcher uses archival panel data using a general method of moments (GMM) model to determine direction of influence between (AC) and (EM) practices through accruals and real activities. Also, research models estimated using robust standard errors to account for autocorrelation and heteroskedasticity problems.
Results: the researcher finds a negative causal relationship between (AC) (as an independent variable) and total of (EM) practices through accruals and real activities (as dependent variable), but this relationship is insignificant in periods before (IFRS) adoption compared to periods after (IFRS). The results show that, improved (AC) leads to a decrease in (EM) practices through accruals by an amount greater than the increase in practices through real activities, especially in the period after (IFRS) adoption. Results are robust in different proxies for accounting comparability.
Originality/Value: The current research is one of the first in the Egyptian business environment, which examines the mutual influence between (AC) and the two types of (EM) practices under (IFRS) adoption. Additionally, it defines the role of (AC) in restricting managers’ decisions regarding the trade-off between (EM) practices through accruals and real activities under (IFRS) adoption as one of the determinants of improving the company's information environment.