FOLLOW THE LEADER: THE IMPACT OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ON ACCRUAL QUALITY

Abstract

The present work aims to examine the impact to leading companies (leaders) on the estimated components of financial reports of subsidiary companies (followers) within the same industry, with a particular focus on the relationship between the accrual quality of the leader company and that of the follower company. Additionally, it explores whether the adoption of International Financial Reporting Standards (IFRS) impacts this relationship. Utilizing data from Saudi companies listed on the financial market—given the delayed IFRS adoption in Saudi Arabia until 2017—the findings indicate that follower companies align their accrual quality with that of the leader companies. This alignment shows minimal change following the adoption of IFRS.