IFRS adoption and earnings management in Kuwait firms: pre and post-COVID-19

This study examines how Kuwaiti firms managed their earnings before and after adopting International Financial Reporting Standards (IFRS), with a focus on the COVID-19 pandemic. It also identifies the factors that influence earnings management and how these factors differ between the two periods. The study used a quantitative approach and analysed financial data from annual reports of 60 Kuwaiti companies listed on the Kuwait Stock Exchange (KSE) from 2016 to 2021 using robust regression. It used discretionary accruals to measure earnings management and three models, including the standard Jones model, modified Jones model, and Kothari model, for the analysis. The findings show that firms are more likely to manage their earnings under IFRS than under the previous Kuwaiti accounting standards. Additionally, earnings management increased significantly during the COVID-19 pandemic as firms tried to meet analysts' expectations and avoid negative market reactions. The study also identified several motives for earnings management, such as increasing executive compensation and avoiding negative market reactions.