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What Drives The Comparability Effect Of Mandatory Ifrs Adoption
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Book Synopsis What Drives the Comparability Effect of Mandatory IFRS Adoption? by : Stefano Cascino
Download or read book What Drives the Comparability Effect of Mandatory IFRS Adoption? written by Stefano Cascino and published by . This book was released on 2015 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the effects of mandatory IFRS adoption on the comparability of financial accounting information. Using two comparability proxies based on De Franco et al. [2011] and a comparability proxy based on the degree of information transfer, our results suggest that the overall comparability effect of mandatory IFRS adoption is marginal. We hypothesize that firm-level heterogeneity in IFRS compliance explains the limited comparability effect. To test this conjecture, we first hand-collect data on IFRS compliance for a sample of German and Italian firms and find that firm-, region-, and country-level incentives systematically shape IFRS compliance. We then use the identified compliance determinants to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level compliance determinants, suggesting that only firms with high compliance incentives experience substantial increases in comparability. Moreover, we document that firms from countries with tighter reporting enforcement experience larger IFRS comparability effects, and that public firms adopting IFRS become less comparable to local GAAP private firms from the same country.
Book Synopsis Comparability Effects of Mandatory IFRS Adoption by : Stefano Cascino
Download or read book Comparability Effects of Mandatory IFRS Adoption written by Stefano Cascino and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Comovement and Accounting Comparability by : Mark H. Lang
Download or read book Earnings Comovement and Accounting Comparability written by Mark H. Lang and published by . This book was released on 2010 with total page 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 Mandatory IFRS Adoption and Financial Statement Comparability by : Francois Brochet
Download or read book Mandatory IFRS Adoption and Financial Statement Comparability written by Francois Brochet and published by . This book was released on 2011 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether mandatory adoption of International Financial Reporting Standards (IFRS) leads to capital market benefits through enhanced financial statement comparability. UK domestic standards are considered very similar to IFRS (Bae et al. 2008), suggesting any capital market benefits observed for UK-domiciled firms are more likely attributable to improvements in comparability (i.e., better precision of across-firm information) than to changes in information quality specific to the firm (i.e., core information quality). If IFRS adoption improves financial statement comparability, we predict this should reduce insiders' ability to benefit from private information. Consistent with these expectations, we find that abnormal returns to insider purchases--used to proxy for private information--are reduced following IFRS adoption. Similar results are derived across numerous subsamples and proxies used to isolate IFRS effects attributable to comparability. Together, the findings are consistent with mandatory IFRS adoption improving comparability and thus leading to capital market benefits by reducing insiders' ability to exploit private information.
Book Synopsis The German Financial System by : Jan Pieter Krahmen (editor)
Download or read book The German Financial System written by Jan Pieter Krahmen (editor) and published by . This book was released on 2004 with total page 550 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by a team of scholars, predominantly from the Centre for Financial Studies in Frankfurt, this volume provides a descriptive survey of the present state of the German financial system and a new analytical framework to explain its workings.
Book Synopsis International Financial Reporting Standards (IFRS) and the Institutional Environment by : Michael J. Neel
Download or read book International Financial Reporting Standards (IFRS) and the Institutional Environment written by Michael J. Neel and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Comparability is a desirable qualitative characteristic of financial information and critical for financial statement users' ability to identify and understand similarities and differences in financial results among reporting entities. Yet, little research explicitly considers either the determinants or benefits of comparability because of difficulty in identifying and measuring the theoretical construct of comparability. Further, the widespread global adoption of IFRS, a relatively homogenous set of accounting standards, is expected to increase comparability among companies that operate in different national jurisdictions. However, prior studies that examine the average impact of mandatory IFRS adoption on comparability find mixed results. I hypothesized that the impact of mandatory IFRS adoption on comparability varies with managers' reporting incentives and differences between countries' domestic standards and IFRS. Using listed firms from 34 countries, I documented that comparability under non-IFRS domestic standards is higher in countries that provide strong reporting incentives (i.e. countries with strict enforcement regimes or high earnings transparency). Additionally, I found an increase in comparability following IFRS adoption (relative to a control sample of non-adopters) in countries that provide strong reporting incentives or with large domestic GAAP-IFRS differences. In contrast, I found evidence of a decrease following IFRS adoption (relative to a control sample of non-adopters) in countries with weak reporting incentives or with small domestic GAAP-IFRS differences. Finally, I showed that changes in comparability surrounding adoption are positively associated with changes in the quality of firms' information environments.
Book Synopsis Accounting Comparability and Economic Outcomes of Mandatory IFRS Adoption by : Michael J. Neel
Download or read book Accounting Comparability and Economic Outcomes of Mandatory IFRS Adoption written by Michael J. Neel and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the accounting mechanisms linking the widespread mandatory adoption of IFRS in 2005 to valuation, liquidity, and analyst outcomes of adoption. I partition adopter firms into treatment groups based on changes in both reporting quality and cross-country accounting comparability around adoption, and study the relative importance of the two financial statement characteristics in explaining the economic effects of adoption. I find that firms with a larger improvement in comparability have better economic outcomes following adoption relative to other adopters. This result holds for tests of firm valuations, liquidity and analyst properties. Moreover, this result holds regardless of how reporting quality changes around adoption. In contrast, improvements in reporting quality around adoption appear to have only a second-order effect that is generally limited to valuation effects for those adopters with concurrent improvements in comparability. These results are robust to alternative design and variable specifications. Finally, I continue to find these results for samples restricted to countries with weaker pre-adoption institutional environments and countries that did not initiate pro-active financial statement reviews, indicating that strong institutions and regulatory improvements are not driving the results.
Book Synopsis Does Mandatory IFRS Adoption Improve the Information Environment? by : Joanne Horton
Download or read book Does Mandatory IFRS Adoption Improve the Information Environment? written by Joanne Horton and published by . This book was released on 2013 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: More than 120 countries require or permit the use of International Financial Reporting Standards (lsquo;IFRS') by publicly listed companies on the basis of higher information quality and accounting comparability from IFRS application. However, the empirical evidence about these presumed benefits are often conflicting and fail to separate between information quality and comparability. In this paper we examine the effect of mandatory IFRS adoption on firms' information environment. We find that after mandatory IFRS adoption consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. We also find decreasing forecast errors for voluntary adopters, but this effect is smaller and not robust. Moreover, we show that the magnitude of the forecast errors decrease is associated with the firm-specific differences between local GAAP and IFRS. This finding suggests that it is IFRS adoption rather than a correlated unobservable factor that is causing forecast errors to decrease. Exploiting individual analyst level data and isolating settings where analysts would benefit more from either increased comparability or higher quality information, we document that the improvement in the information environment is driven both by information and comparability effects. These results suggest that mandatory IFRS adoption has improved the quality of information intermediation in capital markets and as a result firms' information environment by increasing both information quality and accounting comparability.
Book Synopsis Observance of International Accounting Standards by : Donna L. Street
Download or read book Observance of International Accounting Standards written by Donna L. Street and published by . This book was released on 2001-01-01 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Mandatory IFRS Adoption and Accounting Comparability by : Stefano Cascino
Download or read book Mandatory IFRS Adoption and Accounting Comparability written by Stefano Cascino and published by . This book was released on 2010 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Governance matters VI : aggregate and individual governance indicators, 1996-2006 by : Daniel Kaufmann
Download or read book Governance matters VI : aggregate and individual governance indicators, 1996-2006 written by Daniel Kaufmann and published by World Bank Publications. This book was released on 2007 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper reports on the latest update of the Worldwide Governance Indicators (WGI) research project covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2006: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. This latest set of aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance taken from 33 data sources provided by 30 different organizations. The data reflect the views on governance of public sector, private sector, and nongovernmental organization experts, as well as thousands of citizen and firm survey respondents worldwide. The paper also explicitly reports the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. It finds that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons, as well as monitoring progress over time. In less than a decade, a substantial number of countries exhibit statistically significant improvements in at least one dimension of governance, while other countries exhibit deterioration in some dimensions. The decade-long aggregate indicators, together with the disaggregated individual indicators, are available in a newly-redesigned website at www.govindicators.org.
Book Synopsis The Impact of Mandatory IFRS Adoption on Investment Efficiency by : Ru Gao
Download or read book The Impact of Mandatory IFRS Adoption on Investment Efficiency written by Ru Gao and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether mandatory adoption of International Financial Reporting Standards (IFRS) is followed by a decline in firms' sub-optimal investments. On average, we find that the probability of under-investment in capital expenditure declines for firms from 23 countries requiring mandatory adoption of IFRS relative to firms from countries that do not have such requirements; meanwhile the probability of over-investment remains unchanged. However, this real effect becomes smaller when we control for the concurrent changes to the enforcement of financial reporting along with the introduction of IFRS in some countries, suggesting that the switch in standards is only one of the drivers for the observed benefits. Moreover, we find that the reduction in sub-optimal investments is driven by firms with high reporting incentives to provide transparent financial reports from countries where the existing legal and enforcement systems are strong. We further show that the real effect increases with the predicted changes in accounting comparability. Further, we find that after mandatory IFRS adoption, capital investment becomes more value-relevant, less sensitive to the availability of free cash flows and more responsive to growth opportunities. Our findings provide new insights into the real effects of mandatory IFRS adoption.
Book Synopsis Does Mandatory IFRS Adoption Improve the Information Environment? by : Joanne Horton
Download or read book Does Mandatory IFRS Adoption Improve the Information Environment? written by Joanne Horton and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effect of mandatory International Financial Reporting Standards ('IFRS') adoption on firms' information environment. We find that after mandatory IFRS adoption consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. We also find decreasing forecast errors for voluntary adopters, but this effect is smaller and not robust. Moreover, we show that the magnitude of the forecast errors decrease is associated with the firm-specific differences between local GAAP and IFRS. Exploiting individual analyst level data and isolating settings where investors would benefit more from either increased comparability or higher quality information, we document that the improvement in the information environment is driven both by information and comparability effects. These results are robust to variations in the measurement of information environment quality, forecast horizon, sample composition and tests of earnings management.
Book Synopsis The Impact of Institutional Factors and Culture on IFRS Application by : Mundher Jabbar Dagher Al-Hamood
Download or read book The Impact of Institutional Factors and Culture on IFRS Application written by Mundher Jabbar Dagher Al-Hamood and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the importance of the IFRS in the international context of financial reporting accounting, we know very little concerning the effects of culture on the application of the IFRS. This dissertation empirically examines whether accounting information comparability and earnings transparency resulting from the IFRS adoption varies depending on cultural and institutional factors. Thus, the discussion considers, whether cultural and institutional factors can provide an explanation for differences in accounting information comparability and earnings transparency under the IFRS. Accordingly, the primary purpose of this dissertation is to investigate the role of secrecy, conservatism, pre-adoption divergence between IFRS and national GAAP, and enforcement on accounting information comparability and earnings transparency following the mandatory IFRS adoption.This dissertation therefore contributes to the accounting literature by presenting two essays. The essays address the research questions related to the goals of the IFRS in relation to two aspects: accounting information comparability and earnings transparency. The first study investigates comparability with regard to secrecy and pre-adoption divergence between IFRS and national GAAP. In this study, it is argued that it is easy to predict whether the IFRS adoption enhances the market reaction of competitors around the earnings announcements of a given firm. The results were documented evidence demonstrating that information transfer at earnings announcements increases following the mandatory adoption of IFRS, suggesting, on average, a high level of comparability. However, following the investigations, it would appear that comparability increases for firms domiciled in countries with a low level of secrecy (i.e., where transparency dominates) and, where there is a low divergence of accounting distance. Consequently, these results suggest that all firms do not apply the IFRS uniformly and that they do not automatically comply with IFRS. The second study investigates earnings transparency by examining the earnings-returns relationship with regard to enforcement and conservatism. In this study, the effects of enforcement and conservatism on earnings transparency were examined following the mandatory adoption of IFRS. The results were documented, which demonstrate that earnings transparency increases for firms domiciled in countries characterized by low conservatism only (i.e., where optimism dominates) and, there are benefits with regard to earnings transparency following IFRS adoption for firms domiciled in countries characterized by a high level of enforcement. This also suggests that IFRS is not being applied in the same way in all countries. Taken together, there are significant cross-country differences in IFRS compliance. Accordingly, comparability and transparency differ depending on where a firm is domiciled. If the firms are domiciled in a supportive environment in terms of applying the IFRS (i.e., where there is transparency, optimism, low divergence of accounting distance and strong enforcement), the level of comparability and transparency are increased.
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 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.
