Does the IFRS Effect Continue? An International Comparison

In Tae Hwang, Kang Sung Hur and Sun Min Kang
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In Tae Hwang: Department of Accounting, College of Business and Economics, Chung-Ang University, Seoul 06974, Korea
Kang Sung Hur: Department of Accounting, College of Business and Economics, Chung-Ang University, Seoul 06974, Korea
Sun Min Kang: Department of Accounting, College of Business and Economics, Chung-Ang University, Seoul 06974, Korea

Sustainability, 2018, vol. 10, issue 12, 1-20

Abstract: Previous research showed that in the early years after adoption, the change to International Financial Reporting Standards (IFRS) impacted accounting quality. The purpose of this study is to analyze whether those effects have changed over time in companies within countries that have different legal regimes, enforcement, and degrees of external investor protection. We measure accounting quality using discretionary accruals, real activities manipulation, and the stock price value relevance of earnings per share and book value per share. The findings show that the early effects of IFRS adoption continue with the passage of time in companies listed in countries with common law systems, such as the United Kingdom (UK) and Australia, which provide powerful outside investor protection in capital markets. Yet, the early effects of IFRS adoption do not continue after the passage of time in companies listed in Asian countries with statutory law systems, such as Korea and China, which have low levels of outside investor protection. Moreover, it is difficult to obtain evidence that value relevance has improved after the accounting measurement of corporate value shifted to IFRS. The results show that there are differences in the sustained effects on accounting quality, even after the application of IFRS due to the different social, economic, and cultural characteristics of countries.

Keywords: IFRS; accounting quality; outside investor protection; law system; value relevance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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