Mandatory IFRS Adoption Research Articles

The Moderating Effect of Tangibility of assets on The Relationship Between the Mandatory IFRS Adoption and Credit Relevance of Accounting Information: An Empirical Study on non-financial listed companies in The Egyptian Stock Exchange

The Moderating Effect of Tangibility of assets on The Relationship Between the Mandatory IFRS Adoption and Credit Relevance of Accounting Information: An Empirical Study on non-financial listed companies in The Egyptian Stock Exchange

IFRS Mandatory Adoption and Earnings Quality in an Emerging Market: The Case of Ecuador

This paper examines changes in earnings quality, including accruals, earnings smoothing, and asymmetric loss recognition schedules, following the mandatory adoption of IFRS in Ecuador. Using 5,436 year-firm observations, we employ a differences-in-differences approach, comparing the effect of IFRS on an initial group of adopters (publicly traded companies) with non-adopters (small and medium-sized enterprises) with essentially the same financial reporting requirements. Our findings indicate a decrease in accrual levels and more timely recognition of losses, with no evidence of changes in earnings smoothing. These results suggest that companies use the increased flexibility of IFRS to meet debt holders' demand for timely loss recognition. The decrease in accruals suggests earnings management for tax purposes. This study contributes to the literature on IFRS and earnings quality by using a more robust research design and providing evidence on the consequences of IFRS adoption in an emerging market dominated by debt capital and family-owned firms.

The Impact of International Financial Reporting Standards on Aggressive Accrual: Evidence from Saudi Security Exchange

Purpose: This study investigated the impact of international financial reporting standards on aggressive accrual. The distinguishing feature of this research is the study of the recent adoption of international financial reporting standards in one of the most important economies and emerging markets in the world; the Saudi Security Exchange (Tadawul). Theoretical framework: One important issue that has dominated accounting research for many years is the mandatory IFRS adoption. More specifically, the impact of mandatory IFRS adoption on accounting figures, notably accruals. Most of the studies document mixed effects resulting from IFRS adoption. Design/methodology/methodology: This study focuses on Kingdom of Saudi Arabia's Financial Market due to the recent mandatory adoption of the IFRS by Saudi companies in 2017, using 781 firm-year observations. Our study sample will cover 6 years from 2014-2019, three years before adoption (2014-2015-2016) and three years after adoption (2017-2018-2019). Find: The findings of this study were consistent with previous accounting literature. The study shows a decrease in aggressiveness accruals after adopting international financial reporting standards. The study concluded that the companies listed on the Saudi Stock Exchange (Tadawul), especially after the adoption of international financial reporting standards, do not often provide inflated financial reports with distractions that could lead to customers making irrational decisions. Research, practical and social implications: This study put a spotlight on Aggressive Accrual resulting from mandatory IFRS adoption in emerging markets, such as the Kingdom of Saudi Arabia's Financial Market. Therefore, this study provides an exciting opportunity to advance standards setters’ knowledge of the quality of financial reporting in emerging markets. Originality/value: This is the first study to use Aggressive Accrual around mandatory IFRS adoption. worth noting that apart from the prior literature, no study was devoted to the aggressive accrual in the Kingdom of Saudi Arabia's Financial Market.

The Influence of International Financial Reporting Standard on Financial Performance and Taxation of Selected Listed Firms in Nigeria

The study examined the influence of international financial reporting standards on financial performance and taxation of five selected firms each from consumer goods, industrial goods and banking sectors in Nigeria between the period of 2009-2011 and post IFRS adoption period (2013-2020). The specific objectives of the study were to examine the effect of profitability of listed firms and IFRS adoption on taxation of selected firms in Nigeria. The study was anchored on agency and signaling theories. We employed descriptive statistics and paired sample t-tests in the analysis of data. Our findings show that mandatory adoption of IFRS has a significant impact on profitability of listed firms in Nigeria while IFRS has an insignificant impact on taxation of selected listed firms in Nigeria. There were no significant differences in the impact of IFRS adoption on profitability assessment between the key sectors of listed firms and there were no significant differences in the impact of IFRS adoption on taxation between the key sectors of listed firms in Nigeria. It was concluded that IFRS adoption has a significant possible impact on profitability and that taxation is significantly affected by IFRS adoption. Also, significant differences do not exist between the impact of IFRS adoption on the key sectors of listed firms in Nigeria, namely; consumer goods, industrial goods and the banking sectors. The study recommended amongst others that corporate managers should ensure compliance with IFRS since it positively impacts on profit.

Accrualls and systematic risk in Brazilian companies

Purpose: The objective of this study was to investigate whether the systematic risk of companies listed on the Brazilian Stock Exchange (B3) is affected by the quality of accounting information. Additionally, it was verified if the systematic risk was affected differently after the mandatory adoption of IFRS in Brazil.
 Methodology: The sample comprised all companies with observations listed on the Brazilian stock exchange (B3) from 2005 to 2021. Empirical research was carried out with descriptive analysis and a quantitative approach. Data were estimated in a panel with fixed effects. The total value of the accruals of Dechow and Dichev (2002) and Jones (1991) were used as measures of the quality of accounting information. The systematic risk measures were estimated using market models and three factors by Fama and French (1993).
 Results: In general, companies that have higher quality accounting information are able to reduce information asymmetry problems, which increase systematic risk, thus, having higher quality in this information reduces the risk to the investor.
 Contributions of the Study: The results of this paper bring practical contributions to the market and investors, who can feel more secure due to clarity and confidence in the information. Even with the adoption of IFRS in Brazil, the main conclusion of our research is that it actually contributes to the quality of information being converted into lower risks.

Deviations from the Mandatory Adoption of IFRS in Europe? Why Non-Adoption Does Not Mean Non-Compliance

Deviations from the Mandatory Adoption of IFRS in Europe? Why Non-Adoption Does Not Mean Non-Compliance

Accounting Standards and External Corporate Governance. The effect of mandatory IFRS adoption on Analyst Coverage.

Accounting Standards and External Corporate Governance. The effect of mandatory IFRS adoption on Analyst Coverage.

Public peers, accounting comparability, and value relevance of private firms’ financial reporting

We examine whether higher accounting comparability between public and private firms leads to higher value relevance of private firms’ reported financial information. To help develop our hypotheses, we conduct a series of interviews with M&A valuation experts. The experts indicate that comparable accounting between public and private firms allows them to apply public firms’ valuation multiples directly to private firms, which facilitates the use of private firms’ financial reporting in their valuations. Using a large sample of M&A transactions with private target firms in the European Union around the mandatory adoption of IFRS by public firms, we find that private firms’ reported financial information has higher value relevance when it has higher accounting comparability to that of public firms. Furthermore, we find that the impact of accounting comparability is stronger when public peer information is more precise. Our findings are consistent with higher accounting comparability facilitating a spillover of valuation information from public to private markets, which leads to greater value relevance of private firms’ reported financial information.

Do industry specialist auditors enhance accounting quality in the EU? Evidence from the pre-IFRS and mandatory post-IFRS periods

PurposeThe purpose of this study is to examine the association between auditor industry specialization and accounting quality in the European Union (EU).Design/methodology/approachThis study employs a difference-in-differences design and explores audit quality from different industry specialist perspectives and different accounting standard regimes. Specifically, this study examines accounting quality among audits performed by non-industry specialists, EU member country-level industry specialists (EUM-level), EU community-level industry specialists (EUC-level), as well as joint industry specialists.FindingsThis study finds evidence of an improvement in accounting quality among audits performed by non-industry specialists post-IFRS. There is also evidence of an improvement in accounting quality among audits performed by EUC-level industry specialists post-IFRS. In addition, accounting quality among audits performed by EUM-level industry specialists seems to be greater than that of audits performed by non-industry specialists in either the pre-IFRS period or the post-IFRS period. Overall, the mandatory adoption of IFRS in the EU appears to be associated with an improvement in accounting quality among some auditor groups.Research limitations/implicationsIndustry specialization and accounting quality are not directly observable constructs; this study inevitably employs proxy measures for both. The findings of this study are location-specific and apply to mandatory IFRS adopters only.Practical implicationsThis study informs regulators with respect to the importance of industry specialist auditors and financial reporting quality, particularly within the context of the EU. The findings suggest that industry specialists were a significant accounting quality determinant during the mandatory adoption of IFRS. The findings have implications for regulators in the EU and beyond.Originality/valueThis study is among the first to investigate the impact of auditor specialization on accounting quality in the EU, particularly in connection with the adoption of IFRS.

Corporate Social Responsibility and Earnings Management: Evidence from Saudi Arabia after Mandatory IFRS Adoption

Corporate Social Responsibility and Earnings Management: Evidence from Saudi Arabia after Mandatory IFRS Adoption

After the Stock Options Boom: Changes in Equity-Based Pay Following the Mandatory Adoption of IFRS 2

This paper investigates the economic consequences of the mandatory adoption of International Financial Reporting Standard 2 (hereafter, “IFRS 2”) on firms’ choices between alternative executive compensation instruments. With a unique, hand-collected dataset that contains design elements of stock option plans, we find that the adoption of IFRS 2 affects both the decision to keep or to give up stock options and the choice of alternative equity compensation instruments. In contrast to recent evidence from the United States, we find that the majority of firms replacing stock options by other equity instruments switched to performance shares, not to restricted stock. Our dataset allows us to relate firms’ reactions to IFRS 2 to the three major rationales explaining stock option compensation practice, namely, optimal contracting, managerial rent extraction, and perceived cost. Our results suggest that all three rationales contribute to explaining changes in compensation design because firms with sophisticated option plans tend to keep their options, whereas design decisions by firms abandoning options are related to a lack of shareholder power.

The impact of forecasting cash flows on enhancing analysts’ own earnings forecasts: International evidence and the effect of IFRS adoption

AbstractUsing a large international sample from 1995 to 2018, we find that individual analysts’ earnings forecasts accompanied with cash flow forecasts are more accurate than those not accompanied with cash flow forecasts, suggesting that the findings for the United States in Call et al. (2009) apply to other countries. In addition, using a difference‐in‐differences design, we find that the positive association between cash flow forecast provisions and earnings forecast accuracy is weakened after mandatory IFRS adoption. Furthermore, we find that the reduced usefulness of forecasting cash flow for analysts’ own earnings prediction after mandatory IFRS adoption is more pronounced in countries with a common law origin and strong legal enforcement as opposed to countries with a code law origin and weak legal enforcement.

Mandatory adoption of IFRS and cost of capital: does country classification matter Evidence from developed versus developing countries

Mandatory adoption of IFRS and cost of capital: does country classification matter Evidence from developed versus developing countries

Reporting Transparency and Labor Market Outcomes

Corporate financial transparency can affect labor markets directly by mitigating information asymmetries and optimizing the matching of heterogeneous firms and employees (matching efficiency channel) and indirectly through the effect of transparency on firms' capital inputs (capital utilization channel). Exploiting the increase in corporate financial transparency following the mandatory IFRS adoption by European Union countries, we document subsequent increases in labor productivity and wages for manufacturing industries in member countries. Collectively, our results underscore that the benefits of a cross-country increase in transparency go beyond the effects on capital markets and corporate investments, with implications for labor markets equilibria.

Effect Of the Mandatory Adoption of IFRS On the Quality of Accounting Information: Case of France

Effect Of the Mandatory Adoption of IFRS On the Quality of Accounting Information: Case of France

Relationship Between Accounting Conservatism and Investment Efficiency with the Moderating Role of IFRS Adoption in Pakistan

ABSTRACT
 This study investigated the mandatory role of IFRS adoption in the association of accounting conservatism and investment efficiency in Pakistan. The study applied the model of Basu's (1997) to measure the conditional accounting conservatism for timely recognition of expected loss and gain. For empirical analysis, the study took a sample of 165 firms listed at Pakistan Stock Exchange and employed panel data methodology over the data of 2008-2017. Firms size, leverage, return on assets, and growth are taken as control variables to assess the relationship between accounting conservatism and investment efficiency. Findings of the study revealed that conditional accounting conservatism significantly affected the firms’ investment efficiency with the mandatory adoption of IFRS in Pakistan. IFRS adoption enhanced the firms’ investment efficiency and motivated to adopt the principle of accounting conservatism for recognizing the expected losses in timely manner in order to achieve investment efficiency. Timely recognition of expected losses played an important role in reducing agency problems and asymmetric information. In Pakistani setting, it is the pioneer study which highlighted the importance of accounting conservatism in protecting the surplus resources of investors and enhancing the overall investment efficiency under mandatory adoption of IFRS. These findings offer policy implications for focusing on the adaptation of IFRS in Pakistan.

Do Audit Fees and Characteristics of CEO Decrease Audit Delay in Mandatory IFRS Adoption?

The research examined characteristics of CEO and audit fees on audit delay related to changes in mandatory IFRS adoption. In the setting, gender and audit fees were the level of risk tolerance, overconfidence, diligence, and monitoring intensity. As a result, these individual differences were likely to be reflected in audit delay in financial reporting decisions. Using firm data levels between 2008 and 2016 with multivariate regression, the researchers provided empirical evidence supporting the hypothesis that the characteristics of CEO and audit fees were the determinants of audit delay. There are several findings. First, the financial expertise of the CEO has more significant percentages in mandatory IFRS adoption than voluntary IFRS adoption. It is associated with a shorter delay. Second, having a female CEO and appointing a female and minority CEO will increase the likelihood that firms will issue financial reports more timely. Third, higher audit fees in mandatory than voluntary IFRS adoption can decrease audit delay.

IFRS 의무채택이 이익유연화에 미치는 효과

본 연구의 목적은 원칙기반 IFRS의 채택으로 경영자 재량권이 이전보다 더 증가(또는 감소)하고 있는지를 실증적으로 조사하는 것이다. 경영자 재량권 변동을 이익유연화의 강도를 비교하여 실증 검증한 Barth et al.(2008)과 유사하게, 본 연구도 이익유연화 강도가 K-GAAP과 IFRS 채택 기간 간에 차이가 있는지를 시계열 비교함으로써 IFRS 도입이 경영자 재량권에 미치는 효과를 분석한다. 특히 본 연구는 세 가지 측정방법(각각 순이익 변화의 변동성, 순이익과 영업현금흐름 변화의 변동성에 대한 비율, 영업현금흐름과 발생액 간의 상관관계)을 적용하여 이익유연화를 측정하고, 두 가지 보완적 분석방법과 다양한 비교기준을 적용하여 시계열 비교하였다. 2003년부터 2017년까지 상장기업을 대상으로 분석한 결과는 다음과 같다. 첫째, 전체 상장기업을 대상으로 IFRS 기간의 재무제표(각각 별도와 연결재무제표)와 K-GAAP 기간의 개별재무제표를 기준으로 이익조정의 강도를 측정하고 이를 시계열 비교한 결과, 이익유연화 강도는 K-GAAP보다 IFRS 기간에서 더 증가함을 확인하였다. 둘째, 계속 상장기업을 대상으로 대응표본을 구성하여 시계열 비교한 결과, IFRS 기간에서 이익유연화의 강도는 K-GAAP보다 약한 증가 행태를 보였다. 전반적으로 IFRS 채택 기간에서 이익유연화 행태는 K-GAAP 적용 기간보다 증가하는 경향을 보였고 이는 경영자의 재량권 행사가 IFRS 도입 이후에 더 증가했음을 의미한다. 본 연구의 결과는 IFRS 의무채택 이후에 기업이 경제적 실질에 부합하는 원칙적 회계처리 방법을 투명하게 적용하기보다는 원칙의 모호성과 이행지침 부재로 인해 발생한 경영자의 실무적 재량권을 이용하여 이익유연화를 강화하는 경향이 있음을 시사하고 있다.

Public Peers, Accounting Comparability, and Value Relevance of Private Firms’ Financial Reporting

We examine whether higher accounting comparability between public and private firms facilitates the valuation of private firms and, in particular, impacts the value relevance of private firms’ financial reporting in M&A transactions. To help develop our hypotheses, we conduct a series of interviews with M&A valuation experts to obtain insights on the private firm valuation process. Using a large sample of private target firm M&As in the European Union, we predict and find that the financial reporting of private firms that follow the same accounting standards as public firms has higher value relevance. This relation is more pronounced for private firms in industries with more public companies. Furthermore, our analysis around the mandatory adoption of IFRS by public companies suggests that private firms that do not adopt the new public standard show a decrease in the value relevance of their reporting. These findings are consistent with higher accounting comparability facilitating a spillover of valuation information from public to private markets.

Effects of capital structure and institutional–financial characteristics on earnings management practices

PurposeThe purpose of this article is to analyze the effects of financing policy and countries' institutional–financial characteristics on earnings management (EM) practices in Latin American companies.Design/methodology/approachThe GMM estimator was used according to Arellano and Bover (1995) for panel data on a sample of 983 Latin American companies between 1995 and 2017.FindingsLeverage and short-term debt have a negative and nonlinear effect on EM practices. Nonlinearity suggests that firms with high levels of leverage and short-term debt carry out positive discretionary accruals. Countries' institutional and financial development reduces EM practices. Mandatory IFRS adoption also reduces these practices and mitigates the effects of the low institutional and financial development on EM.Originality/valueThese results reveal the relevance of companies' financing policy as a means of controlling EM practices. Results also suggest that policy effectiveness decreases with leverage and short-term debt. It is suggested that policymakers design financial policies aimed to promote institutional and financial development as a means of systematic control over EM activities, which also includes IFRS.