Fair value and earnings management evidence from the Kuwaiti market

الملخص EN

Objectives: The present study aims to test whether the accounting information of fair values provided by International Accounting Standard (IAS) No.

39 is used for earnings management purposes in Kuwaiti market.

Method: This study performs regression analysis using data related to a number of Kuwaiti firms to examine whether firms engage in gains trading related to Available-for-Sale (AFS) securities, and whether these gains trading, if any, arc associated with proxies of firm's political visibility, executive compensation, and credit financing.

Results: The empirical results reported show evidence of gain trading practices by Kuwaiti firms, and that this gain trading is significantly related to firm size (e.g., political cost) and profitability (i.e., executive compensa¬tion), but not related to firms debt ratio.

Conclusion: The study is supposed to be of a value to the international accounting literature as it provides, for the first time, empirical evidence about the practice of gains trading from the Gulf Cooperation Council (GCC) region.

The study’s results are also expected to be of a value to regulators and policy makers for better regulatory supervision over corporate financial reporting.