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The Effects Of Mandatory Ifrs Adoption In The Eu
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Book Synopsis The Effects of Mandatory IFRS Adoption in the EU by : Brian Singleton-Green
Download or read book The Effects of Mandatory IFRS Adoption in the EU written by Brian Singleton-Green and published by . This book was released on 2015 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the empirical research evidence on the effects of mandatory IFRS adoption in the EU. The research is classified and assessed in relation to the objectives of EU Regulation 1606/2002, which made IFRS mandatory in the EU. The review finds that there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. But the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. What is clear is that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries. On the possible role of IFRS in the financial crisis in the EU, more research is needed before conclusions can be drawn. The paper also considers the problems of interpreting the research and drawing conclusions from it for policy making purposes.
Book Synopsis Earnings Quality by : Jennifer Francis
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Book Synopsis Impact of Mandatory IFRS Adoption on Conditional Conservatism in Europe by : Paul André
Download or read book Impact of Mandatory IFRS Adoption on Conditional Conservatism in Europe written by Paul André and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effect of the mandatory adoption of IFRS in Europe in 2005 on conditional conservatism. To capture conditional conservatism, we use three measures: the Basu (1997) measure, the Khan and Watts (2009) measure, and a measure controlling for potential shifts in unconditional conservatism and cost of capital after the adoption of IFRS. From a sample of 7,251 firm-year observations drawn from 16 European countries, we document an overall decline of the degree of conditional conservatism across our three measures. While there is no change in weak enforcement/governance countries which remain less conditionally conservative than strong enforcement/governance countries, the latter exhibit a significant decrease. Further, we demonstrate that the decline is more significant for firms carrying intangible assets and goodwill in their balance sheets, items for which impairment tests rely on unverifiable fair value estimates. We argue that IFRS are conceptually conditionally conservative but that inappropriate application of conditional conservatism principles may have prevented financial reporting from reaching the level of conservatism targeted by the IASB.
Book Synopsis The introduction of IFRS. Consequences for investment decisions by : Simon Falcke
Download or read book The introduction of IFRS. Consequences for investment decisions written by Simon Falcke and published by GRIN Verlag. This book was released on 2020-07-09 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2019 in the subject Business economics - Investment and Finance, grade: 1,0, Otto Beisheim School of Management Vallendar, language: English, abstract: Starting in 2005, the portion of foreign shareholders in the Dax has risen from 45% to 58% in the last decade. In the same year, the regulation of the European Union from 2002 came into effect which required all listed firms in the European Union to report their consolidated accounts in accordance with the International Financial Reporting Standard (IFRS) from 2005 on instead of each countries’ generally accepted accounting standards (GAAP). This is just one example where the volume of investments increased concurrently with the adoption of IFRS. Therefore, the question arises if the mandatory adoption of IFRS in the EU in 2005 or in other cases significantly affected and continues to affect investment decisions among adopters or third parties. In order to better account for differences between different types of investors and investees, we differentiate between retail investors, institutional investors and corporate finance activities. Moreover, we focus on the consequence of IFRS adoption on equity investment decisions as most research appears to focus on the equity instead of the credit market. Additionally, Lourenco & Branco point out that most research which finds no significant effects of IFRS adoption on investment decisions appears to focus on voluntary adoption before 2005. Thus, this paper mainly focuses on mandatory IFRS adoption. In this context, research suggests that mandatory IFRS adopters experience significant capital markets benefits as well as enhanced foreign institutional ownership and enhanced M&A activity. Ultimately, we observe four overarching drivers behind the aforementioned observations that impact investment decisions across different types of investors and investees.
Book Synopsis Three Essays on the Effects of the Simultaneous Adoption of IFRS (International Financial Reporting Standards) and MAD (Market Abuse Directive) in Europe by : Fatima Baalbaki Shibly
Download or read book Three Essays on the Effects of the Simultaneous Adoption of IFRS (International Financial Reporting Standards) and MAD (Market Abuse Directive) in Europe written by Fatima Baalbaki Shibly and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: While prior research on mandatory IFRS adoption fails to provide evidence of improvement in the quality of financial reporting (increased transparency and/or comparability), it provides almost unanimous evidence of beneficial capital-market impacts. Within the European Union (EU), mandatory IFRS adoption coincides with the adoption of the Market Abuse Directive (MAD). While the mandatory adoption of IFRS took place in 2005, MAD was passed between 2004 and 2007 depending on the EU country under consideration. Furthermore, both IFRS and MAD aim towards increased transparency, either by improving the quality of financial reporting (IFRS) or by prohibiting selective disclosures to enhance common information available to all market participants (MAD). Our first essay aims to disentangle the respective market impacts of MAD adoption and IFRS adoption in order to determine the specific effect of each regulation. Our evidence suggests that a significant part of the capital market effects usually attributed to IFRS comes, at least to some extent, from the contemporaneous adoption of the Market Abuse Directive. Our second essay focuses on the role of information environment. Investigating how information environment affects the market impacts of both MAD adoption and IFRS adoption is crucial to determine whether all firms benefit identically from these regulations. Using firm size and analyst following as proxies capturing firms' information environment, we provide evidence showing that small firms and firms with weak analyst following are those that benefit the most from the introduction of the IFRS mandate. In contrast, large firms and firms with high analyst coverage benefit the most from MAD adoption. Our third essay analyzes the role of enforcement. We find that the effectiveness of both IFRS and MAD is hampered by different enforcement levels across firms and countries. Moreover, the observed capital-market outcomes on one regulation differ if the effects of both regulations are not clearly dissociated. Thus, we caution researchers not to attribute capital-market outcomes primarily or solely to one regulation without taking into account the concomitant adoption of the other one.
Download or read book IAS/ IFRS written by Vera Palea and published by FrancoAngeli. This book was released on 2006 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Impact of Mandatory IFRS Adoption on Foreign Mutual Fund Ownership by : Mark L. DeFond
Download or read book The Impact of Mandatory IFRS Adoption on Foreign Mutual Fund Ownership written by Mark L. DeFond and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Proponents of IFRS argue that mandating a uniform set of accounting standards improves financial statement comparability that in turn attracts greater cross-border investment. We test this assertion by examining changes in foreign mutual fund investment in firms following mandatory IFRS adoption in the European Union in 2005. We measure improved comparability as a credible increase in uniformity, defined as a large increase in the number of industry peers using the same accounting standards in countries with credible implementation. Consistent with this assertion, we find that foreign mutual fund ownership increases when mandatory IFRS adoption leads to improved comparability.
Book Synopsis Secrecy and the Impact of Mandatory IFRS Adoption on Earnings Quality in Europe by : Noor Houqe
Download or read book Secrecy and the Impact of Mandatory IFRS Adoption on Earnings Quality in Europe written by Noor Houqe and published by . This book was released on 2017 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of mandatory IFRS adoption on earnings quality in countries which exhibit high financial secrecy. Earnings quality is proxied by signed abnormal accruals and earnings conservatism. Using 19,324 firm-years from 14 countries over the period 1998-2011, we find that firms in a high-secrecy country tend to report higher abnormal accruals and earnings conservatism, which results in lower earnings quality. On the other hand, we find that mandatory IFRS adoption improves earnings quality by decreasing abnormal accruals and earnings conservatism. Our study provides evidence of the interaction between national culture, as indicated by secrecy, and IFRS adoption and helps to explain differences in earnings quality across different jurisdictions following IFRS adoption.
Book Synopsis Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital? by : Siqi Li
Download or read book Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital? written by Siqi Li and published by . This book was released on 2011 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union (EU) in 2005 reduces the cost of equity capital. Using a sample of 6,456 firm-year observations of 1,084 EU firms during the 1995 to 2006 period, I find evidence that, on average, the IFRS mandate significantly reduces the cost of equity for mandatory adopters by 47 basis points. I also find that this reduction is present only in countries with strong legal enforcement, and that increased disclosure and enhanced information comparability are two mechanisms behind the cost of equity reduction. Taken together, these findings suggest that while mandatory IFRS adoption significantly lowers firms' cost of equity, the effects depend on the strength of the countries' legal enforcement.
Book Synopsis The Effects of the IAS/IFRS Adoption in the European Union on the Financial Industry by : Vera Palea
Download or read book The Effects of the IAS/IFRS Adoption in the European Union on the Financial Industry written by Vera Palea and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry have been examined. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the adoption of the IAS/IFRS in the European Union by Regulation 1606/2002 has led effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator's purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as accomplished. Furthermore, they point out that firms which implemented the IAS/IFRS have gained a comparative advantage on the equity market over firms still adopting accounting standards based on the IV and VII European Directives.
Book Synopsis The Effects of IFRS Adoption in the European Union on Banks' Cost of Equity by : Vera Palea
Download or read book The Effects of IFRS Adoption in the European Union on Banks' Cost of Equity written by Vera Palea and published by . This book was released on 2019 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effects of disclosure level on the cost of equity are a matter of considerable interest and importance to the financial reporting community. Economic theory indeed claims that commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. Accordingly, this paper investigates the effects of IFRS adoption in Europe on the cost of equity for the bank industry. In doing so, it performs an event study, which isolates the effects of accounting changes on the cost of capital from institutional and enforcement mechanisms. This study shows that IFRS adoption has exerted, on average, a positive effect on the cost of capital for the bank industry at least in the very short run. Firms adopting IFRS seem to have experienced a lower cost of equity in the period immediately subsequent the release of financial reporting according to the new accounting standard set.
Book Synopsis Consequences of Voluntary and Mandatory Fair Value Accounting by : Karl A. Muller
Download or read book Consequences of Voluntary and Mandatory Fair Value Accounting written by Karl A. Muller and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the causes and consequences of European real estate firms' decisions to provide investment property fair values prior to the required disclosure of this information under International Financial Reporting Standards (IFRS). We find evidence that investor demand for fair value information--reflected in more dispersed ownership--and a firm's commitment to transparency increase the likelihood of providing fair values prior to their required provision under International Accounting Standard 40 - Investment Property. We also find that firms not providing these fair values face higher information asymmetry. However, we fail to find that the relatively higher information asymmetry was reduced following mandatory adoption of IFRS. Rather, we find that differences in information asymmetry largely remain. Taken together, this evidence suggests that common adoption of fair value accounting due to the mandatory adoption of IFRS does not necessarily level the informational playing field.
Book Synopsis Essays on the Economic Consequences of Mandatory IFRS Reporting around the world by : Ulf Brüggemann
Download or read book Essays on the Economic Consequences of Mandatory IFRS Reporting around the world written by Ulf Brüggemann and published by Springer Science & Business Media. This book was released on 2011-08-31 with total page 162 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ulf Brüggemann discusses and empirically investigates the economic consequences of mandatory switch to IFRS. He provides evidence that cross-border investments by individual investors increased following the introduction of IFRS.
Book Synopsis Cost of Equity Effects from Mandatory IFRS Adoption, Legal and Financial Institutions, and Auditor Quality Dimensions by : Raymond Leung
Download or read book Cost of Equity Effects from Mandatory IFRS Adoption, Legal and Financial Institutions, and Auditor Quality Dimensions written by Raymond Leung and published by . This book was released on 2015 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines if cost of equity can be negatively affected by mandatory IFRS adoption. Also, this paper explores how cost of equity effects differ depending on different national level of governance mechanisms because financial reporting incentives are influenced by both accounting regulation and institutional factors. While I document that mandatory IFRS adoption negatively influences cost of equity beyond the transition period, however, such observed results may also be attributed to the concurrent evolving effects from legal quality and enforcement, stock market development and auditor quality. Given that most cross-country national governance studies only apply a set of dated and static indices; I argue that using, time-varying and cross-sectional institutional indices can provide better measurement of both individual and interactive effects on firm-level cost of equity. While average legal mechanisms are an important factor, the results show that increase (decrease) in regulatory quality (legal enforcement) interacts with post-IFRS period significantly (insignificantly) and associate with lower (higher) ex-ante cost of equity. Moreover, I find that countries with different legal origins systematically associate with different dimensions of stock market development to reduce the cost of equity. Also, auditor quality is effective to reduce information asymmetry, but it highly depends on national legal quality and enforcement. Finally, I document that when cost of equity is lowered, it benefits firms with higher value.
Book Synopsis The Effect of Mandatory IFRS Adoption on Real and Accrual-Based Earnings Management Activities by : Leonidas C. Doukakis
Download or read book The Effect of Mandatory IFRS Adoption on Real and Accrual-Based Earnings Management Activities written by Leonidas C. Doukakis and published by . This book was released on 2014 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of mandatory adoption of International Financial Reporting Standards (IFRS) on both accrual-based and real earnings management. While prior literature has mainly examined the effects of IFRS adoption on accrual-based earnings management, no study to date has focused on the impact of IFRS adoption on real earnings management. Using a sample of 15,206 observations from 22 European countries between 2000 and 2010, this study employs a control sample of voluntary adopters and applies a differences-in-differences design to control for confounding concurrent events. The results suggest that mandatory IFRS adoption had no significant impact on either real or accrual-based earnings management practices. Additional analysis on a sub-sample of firms with relatively strong earnings management incentives supports a dominant role for firm-level reporting incentives over accounting standards in shaping financial reporting quality.
Book Synopsis A Missing Link? How Selection Effects Shape Evidence on the Market Benefits of Mandatory IFRS Adoption by : Joerg-Markus Hitz
Download or read book A Missing Link? How Selection Effects Shape Evidence on the Market Benefits of Mandatory IFRS Adoption written by Joerg-Markus Hitz and published by . This book was released on 2018 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since 2005, the year of mandatory application of International Financial Reporting Standards (IFRS) in many jurisdictions worldwide, the number of listed firms in these countries has been on the decline, compared to non-IFRS jurisdictions. We posit that this decrease is, among other things, consistent with regulatory avoidance by specific firms that opt to leave regulated stock exchanges and hence the IFRS mandate due to unfavorable cost-benefit tradeoffs. These firm reactions to the regulation likely create a selection effect in studies that investigate economic outcomes of mandatory IFRS adoption. For a global sample of firms, we find evidence in line with systematic opt outs from IFRS. Conducting a cross-country study of the effects of mandatory IFRS adoption on liquidity, we then corroborate previous evidence of liquidity effects, which are clustered in countries that installed enforcement mechanisms concurrent with the IFRS mandate. However, when we incorporate the predicted treatment selection effect into our model, we show that our treatment selection effect explains liquidity findings in the post IFRS period beyond the commonly documented IFRS, EU, and enforcement variation. Taken together, our findings provide a new perspective on the effects of mandatory IFRS adoption by shedding light on a novel “causal path” from mandatory IFRS adoption to positive market outcomes.
Book Synopsis Mandatory IFRS Reporting and Changes in Enforcement by : Hans Bonde Christensen
Download or read book Mandatory IFRS Reporting and Changes in Enforcement written by Hans Bonde Christensen and published by . This book was released on 2015 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several potential explanations for the observed capital-market effects. We find that, across all countries, mandatory IFRS reporting had little impact on liquidity. The liquidity effects around IFRS introduction are concentrated in the European Union (EU) and limited to five EU countries that concurrently made substantive changes in reporting enforcement. There is little evidence of liquidity benefits in IFRS countries without substantive enforcement changes even when they have strong legal and regulatory systems. Moreover, we find similar liquidity effects for firms that experience enforcement changes but do not concurrently switch to IFRS. Thus, changes in reporting enforcement or (unobserved) factors associated with these changes play a critical role for the observed liquidity benefits after mandatory IFRS adoption. In contrast, the change in accounting standards seems to have had little effect on market liquidity.
