Firm value and market liquidity around the adoption of common accounting standards

Pingyang Gao, Xu Jiang and Gaoqing Zhang

Journal of Accounting and Economics, 2019, vol. 68, issue 1

Abstract: The adoption of common accounting standards generates both a precision effect and a network effect. When firms use common standards, investors can leverage their knowledge about the standards to process more financial reports. Embedding both effects into the economic framework of Baiman and Verrecchia (1995, 1996), we study the adoption’s effects on reporting precision, firm value, and liquidity of both the switcher and the early adopter. The model helps address the identification challenge and reconcile some existing results in the empirical literature on IFRS adoption. It also generates implications for standardizing disclosure and accounting methods.

Keywords: Reporting quality; Network effect; Information processing; Firm value; Liquidity; International Financial Reporting Standards (IFRS) (search for similar items in EconPapers)
JEL-codes: G15 M41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:68:y:2019:i:1:s0165410118301216

DOI: 10.1016/j.jacceco.2018.11.001

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