Abstract
This study examines the effect of mandatory IFRS adoption on the quality of accounting earnings for the firms listed in London Stock Exchange. After examining 9056 firm year observations for the period from 1994 to 2013 the results suggest that the mandatory adoption of IFRS leads to higher earnings quality. This study extends the current literature that examines the consequences of mandating IFRS adoption in the UK and shows that adopting high quality accounting standards leads to high quality accounting numbers.
Highlights
Prior research suggests that mandatory adoption of IFRS leads to high-quality accounting numbers
This study extends the current literature that examines the consequences of mandating IFRS adoption in the United Kingdom (UK) and shows that adopting high quality accounting standards leads to high quality accounting numbers
Consistent results from emerging market were provided by Ismail et al (2013), where they find that IFRS adoption leads to higher earnings quality for Malaysian firms.In addition, other research documented an increase in the value relevance of accounting numbers following the adoption of IFRS
Summary
Prior research suggests that mandatory adoption of IFRS leads to high-quality accounting numbers. The proponents of IFRS adoption argue that it improves the quality and quantity of financial disclosure (Ru& Baljit, 2018). This assertion is supported by empirical evidence that suggests IFRS adoption leads to high-quality earnings. Houqe et al (2012), and Barth et al (2008) provide international evidence that IFRS adoption leads to higher quality accounting numbers. Consistent results from emerging market were provided by Ismail et al (2013), where they find that IFRS adoption leads to higher earnings quality for Malaysian firms.In addition, other research documented an increase in the value relevance of accounting numbers following the adoption of IFRS. Devalle et al (2010) find that the adoption of IFRS increases the value relevance of some adopting countries. Clarkson et al (2011) document a decrease in the value relevance for the companies of Common Low Countries, while record an increase in the value relevance of accounting numbers for Code Low Countries, following the mandatory adoption of IFRS
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