What drives the comparability effect of mandatory IFRS adoption?

Stefano Cascino () and Joachim Gassen ()
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Stefano Cascino: London School of Economics
Joachim Gassen: Humboldt-Universität zu Berlin

Review of Accounting Studies, 2015, vol. 20, issue 1, No 8, 242-282

Abstract: Abstract We investigate the effects of mandatory International Financial Reporting Standards (IFRS) adoption on the comparability of financial accounting information. Using a set of alternative comparability measures, 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 these compliance determinants to explain the variance in the comparability effect of mandatory IFRS adoption and find 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.

Keywords: International accounting; IFRS; Comparability; Compliance; Reporting incentives (search for similar items in EconPapers)
JEL-codes: G14 M41 M48 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s11142-014-9296-5

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