Corporate Governance, IFRS Compliance, and Real Earnings Management: Evidence from GCC Capital Markets

This study investigates the relationship between International Financial Reporting Standards (IFRS) compliance and financial reporting quality among non-financial listed firms in the Gulf Cooperation Council (GCC) countries while examining the moderating role of corporate governance mechanisms. Although IFRS has been widely adopted across the GCC region to improve transparency and comparability of financial reporting, empirical evidence regarding its effectiveness remains inconclusive due to differences in governance quality and institutional environments. Using a balanced panel from 27 listed firms across Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates over the period 2016–2025, the study evaluates financial reporting quality through real earnings management. IFRS compliance is measured using a disclosure compliance index, while board independence and audit committee independence are incorporated as moderating governance mechanisms. Panel regression analysis is employed to estimate both the direct and interaction effects after controlling for firm size, leverage, and profitability. The findings indicate that higher IFRS compliance significantly improves financial reporting quality by reducing real earnings management. Board independence exhibits a positive association with earnings management, explaining that formal board independence alone does not necessarily enhance monitoring effectiveness within GCC firms. In contrast, audit committee independence significantly strengthens the relationship between IFRS compliance and financial reporting quality, indicating that effective audit oversight enhances the reporting benefits associated with IFRS implementation. Among the control variables, firm size improves reporting quality, whereas leverage increases earnings management, while profitability does not exhibit a significant effect. The study contributes to the accounting and corporate governance literature by demonstrating that the effectiveness of IFRS depends not only on compliance with accounting standards but also on the quality of internal governance mechanisms. The findings provide practical implications for regulators, investors, and corporate policymakers seeking to strengthen financial reporting credibility and corporate transparency across GCC capital markets.