Beyond Adoption: The Contingent Role of Corporate Governance in Moderating IFRS Effectiveness Against Earnings Management.

Abstract:

This study investigates the moderating role of corporate governance mechanisms on the relationship between International Financial Reporting Standards (IFRS) adoption and earnings management across diverse institutional contexts. Drawing upon an integrated theoretical framework combining agency theory, institutional theory, positive accounting theory, and stewardship theory, the research employs a quantitative longitudinal panel design analyzing publicly listed firms across multiple jurisdictions from 2005 to 2025. Earnings management is measured using discretionary accruals (Modified Jones Model) and real earnings management proxies, while corporate governance is operationalized through board independence, audit committee effectiveness, institutional ownership, and ownership concentration. Hierarchical multiple regression and system GMM estimation address endogeneity concerns. Findings reveal three principal insights: (1) governance mechanisms serve as critical substitutes for weak external enforcement in jurisdictions such as Nigeria, while exhibiting a ceiling effect in high-quality reporting environments such as South Africa; (2) in concentrated ownership structures (e.g., India), conventional governance mechanisms may be captured by controlling shareholders, rendering them ineffective moderators; and (3) specific IFRS standards such as IFRS 15 may not constrain earnings management regardless of governance quality. The study rejects naive universalism in favour of contingency-based policy designs sensitive to local enforcement strength, ownership structures, and governance maturity. Recommendations include jurisdiction-specific governance precondition assessments, redesigned governance codes addressing principal-principal conflicts, and strengthened enforcement coordination.