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Rev Account Stud (2015) 20:242282
DOI 10.1007/s11142-014-9296-5
Stefano Cascino Joachim Gassen
Published online: 20 June 2014 Springer Science+Business Media New York 2014
Abstract We investigate the effects of mandatory International Financial Reporting Standards (IFRS) adoption on the comparability of nancial 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 rm-level heterogeneity in IFRS compliance explains the limited comparability effect. To test this conjecture, we rst hand-collect data on IFRS compliance for a sample of German and Italian rms and nd that rm-, 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 nd that only rms with high compliance incentives experience substantial increases in comparability. Moreover, we document that rms from countries with tighter reporting enforcement experience larger IFRS comparability effects, and that public rms adopting IFRS become less comparable to local GAAP private rms from the same country.
Keywords International accounting IFRS Comparability Compliance
Reporting incentives
JEL Classication M41 M48 G14
S. Cascino
Department of Accounting, London School of Economics, Houghton Street, London WC2A 2AE, UKe-mail: [email protected]
J. Gassen (&)
Wirtschaftswissenschaftliche Fakultat, Center for Applied Statistics and Economics, Humboldt-Universitat zu Berlin, 10099 Berlin, Germanye-mail: [email protected]
What drives the comparability effect of mandatory IFRS adoption?
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What drives the comparability effect of mandatory IFRS adoption? 243
1 Introduction
The mandatory adoption of International Financial Reporting Standards (IFRS) by European listed rms in 2005, accompanied by similar regulatory action in other jurisdictions, represents one of the most inuential accounting rule changes of recent times. We investigate whether rms subject to the mandatory adoption of IFRS have experienced a material increase in the comparability of nancial accounting information. In addition, we identify rm- and country-level determinants that inuence the comparability change around mandatory IFRS adoption.
European policy makers state that the reason for mandating a common set of accounting standards for listed companies is to level the playing eld for participants in the European capital market by increasing the comparability of nancial statements prepared by publicly traded companies across Europe (Regulation (EC) No. 1606/2002, Par. 1). The International Accounting Standards Board (IASB)...