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Title: The impact of mandatory IFRS adoption on accrual anomaly and earning conservatism
Authors: Chen, Q
Jiang, Y
Issue Date: 2012
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 12-16, Sep 2012
Abstract: This paper investigates the impact of mandatory IFRS adoption on earning management and accounting conservatism by European countries. Using firm-level data of nine European countries within G20 who mandatorily adopted IFRS in 2005, we found that IFRS either increase or decrease accounting conservatism within the sample countries. With Mishkin test to market efficiency at valuation with disaggregated earning components, the results show that the accrual anomaly is not a generalized phenomenon within Europe, especially the Common Law countries. The market seems to be less able to distinguish abnormal accrual from normal accrual estimated by Jones model, which in term cause the mis-valuation of the future earnings forecast. Cross country characteristics examination, including law enforcement, protection of shareholder and accounting structure, etc. suggests that the change of accounting standard itself cannot solely improve the valuation information environment. Relevant commercial law should change to support IFRS to make accounting information informative and comparable.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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