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What drives the comparability effect of mandatory IFRS adoption?

Cascino, Stefano and Gassen, Joachim (2015) What drives the comparability effect of mandatory IFRS adoption? Review of Accounting Studies, 20 (1). pp. 242-282. ISSN 1380-6653

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Abstract

We investigate the effects of mandatory IFRS adoption on the comparability of financial accounting information. Using two comparability proxies based on De Franco et al. [2011] and a comparability proxy based on the degree of information transfer, 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 the identified compliance determinants to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level compliance determinants, suggesting 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.

Item Type: Article
Official URL: http://link.springer.com/journal/11142
Additional Information: © 2014 Springer Science+Business Media New York
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Journal of Economic Literature Classification System: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Sets: Departments > Accounting
Collections > Economists Online
Funders: German Research Foundation
Date Deposited: 11 Jul 2014 11:52
URL: http://eprints.lse.ac.uk/57682/

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