TY - JOUR

T1 - IFRS 16 and firms’ risk in emerging markets: the impact of managerial overconfidence

AU - Mansour , Karim

AU - Sayed , Emad

AU - Hussainey, Khaled

PY - 2025/1/20

Y1 - 2025/1/20

N2 - Purpose- The purpose of this study is to (i) investigate how IFRS 16 affects firms' risk in Egypt and (ii) examine the moderating role of managerial overconfidence on this relationship.Design/methodology/approach- This study uses data from the annual reports of 38 Egyptian firms from 2014 to 2022. This study employs the Generalized Method of Moments (GMM) and the Three-Stage Least Squares (3SLS) as estimation techniques.Findings- The results show that IFRS 16 positively affect Egyptian firm risk, while managerial overconfidence reduces this positive effect.Originality/value- Grounded in agency theory, this study reveals novel empirical insights into the impact of IFRS 16 on firm risk, especially in the context of emerging markets. Utilizing behavioural decision theory and upper echelons theory, it examines the previously unexplored influence of managerial overconfidence on this relationship.Limitation- This study has some limitations. First, the sample size was relatively small. Second, our analysis did not incorporate other metrics of managerial overconfidence owing to the unavailability of relevant data in Egypt.Practical Implications- – This study assists stakeholders and regulators in realizing the implications of IFRS 16 on a firm’s risk, especially in emerging markets. Also, it enables managers to identify and assess lease-related risks more accurately to assist in developing appropriate risk mitigation strategies and optimizing lease-related decision-making processes. Furthermore, it aids in enhancing comprehension and knowledge of the interplay between managerial behaviour and firm outcomes.

AB - Purpose- The purpose of this study is to (i) investigate how IFRS 16 affects firms' risk in Egypt and (ii) examine the moderating role of managerial overconfidence on this relationship.Design/methodology/approach- This study uses data from the annual reports of 38 Egyptian firms from 2014 to 2022. This study employs the Generalized Method of Moments (GMM) and the Three-Stage Least Squares (3SLS) as estimation techniques.Findings- The results show that IFRS 16 positively affect Egyptian firm risk, while managerial overconfidence reduces this positive effect.Originality/value- Grounded in agency theory, this study reveals novel empirical insights into the impact of IFRS 16 on firm risk, especially in the context of emerging markets. Utilizing behavioural decision theory and upper echelons theory, it examines the previously unexplored influence of managerial overconfidence on this relationship.Limitation- This study has some limitations. First, the sample size was relatively small. Second, our analysis did not incorporate other metrics of managerial overconfidence owing to the unavailability of relevant data in Egypt.Practical Implications- – This study assists stakeholders and regulators in realizing the implications of IFRS 16 on a firm’s risk, especially in emerging markets. Also, it enables managers to identify and assess lease-related risks more accurately to assist in developing appropriate risk mitigation strategies and optimizing lease-related decision-making processes. Furthermore, it aids in enhancing comprehension and knowledge of the interplay between managerial behaviour and firm outcomes.

U2 - 10.1108/JAAR-02-2024-0061

DO - 10.1108/JAAR-02-2024-0061

M3 - Article

JO - Journal of Applied Accounting Research

JF - Journal of Applied Accounting Research

SN - 0967-5426

ER -