This research examines how International Financial Reporting Standards (IFRS) implementation affects earnings management practices and audit quality among 120 publicly traded companies across Ghana, Nigeria, Kenya, and South Africa from 2018 to 2020. The study investigates whether corporate governance mechanisms moderate these relationships. The theoretical framework integrates Agency Theory, Institutional Theory, and Capital Needs Theory. Methodologically, the research employs panel regression analysis and uses the Modified Jones Model to calculate discretionary accruals as an earnings management indicator. Audit quality assessment incorporates auditor classification and audit opinion types, while corporate governance quality is evaluated through board independence, board size, and audit committee effectiveness measures. The analysis controls for organizational factors including firm size, return on assets, and leverage ratios. This research contributes to our understanding of how standardized international accounting practices influence financial reporting integrity in developing African capital markets.
Regression results reveal nuanced inter-country differences in the IFRS–EM–AQ nexus. IFRS adoption is significantly associated with reduced earnings management in Ghana, Nigeria, and Kenya, affirming the standard’s disciplining effect. Ghana demonstrated the strongest negative relationship, indicating that regulatory enforcement and growing professional capacity have enabled firms to comply effectively with IFRS, limiting opportunistic accounting behaviours. However, the interaction between IFRS and CG was only modestly significant in Ghana, suggesting that governance structures, though supportive, are not the main drivers of this effect. In Nigeria, the relationship between IFRS and EM was weaker but significant, with a more pronounced interaction effect with CG. This indicates that in jurisdictions with weaker enforcement, corporate governance mechanisms play a critical role in amplifying the standards’ effects. Kenya showed a moderate but statistically significant negative IFRS EM relationship with relatively high model explanatory power. The interaction between IFRS and CG was also significant, reflecting institutional reforms and governance improvements led by regulatory bodies such as the Capital Markets Authority.
The South African market demonstrated no statistically meaningful correlation between IFRS implementation and earnings management practices, likely attributable to its pre-existing high-quality financial reporting environment. However, South Africa exhibited the strongest positive relationship between IFRS adoption and audit quality improvements, reflecting its sophisticated financial infrastructure, well-developed capital markets, and corporate governance practices aligned with the comprehensive King IV Code. Across the four nations studied, IFRS implementation generally enhanced audit quality, though with varying degrees of effectiveness. The improvements followed a distinct pattern with South Africa showing the most substantial gains, followed sequentially by Kenya, Ghana, and Nigeria. These variations correspond directly with the relative robustness and development stage of each country’s audit regulatory mechanisms and corporate governance frameworks.
The findings suggest that pre-existing market infrastructure and regulatory maturity significantly influence how effectively IFRS adoption translates into measurable financial reporting quality improvements.
The study’s findings confirm Hypothesis 1 and 3 in three of the four countries, supporting the theoretical assertion that IFRS adoption curtails agency problems (Agency Theory) and enhances credibility for capital-seeking firms (Capital Needs Theory). Hypotheses 2 and 4 are partially supported, with the moderating role of CG being more pronounced in contexts with weak external enforcement (Institutional Theory). Finally, the results for Hypothesis 5 highlight that control variables significantly influence financial reporting outcomes firm size positively predicts AQ across all countries, while leverage increases EM risk, especially in Ghana, Nigeria, and Kenya.
By integrating financial reporting standards, governance mechanisms, and institutional environments, this study advances the understanding of how IFRS and CG collectively shape financial reporting quality in Sub-Saharan Africa. The findings hold implications for regulators, policymakers, and investors seeking to strengthen market discipline and improve transparency in emerging markets.