What drives the comparability effect of mandatory IFRS adoption?

Stefano Cascino; Joachim Gassen

doi:10.1007/s11142-014-9296-5

Review of Accounting Studies

March 2015, Volume 20, Issue 1, pp 242–282

What drives the comparability effect of mandatory IFRS adoption?

Authors
Authors and affiliations

Stefano Cascino
Joachim GassenEmail author

Article

First Online:: 20 June 2014

DOI: 10.1007/s11142-014-9296-5

Cite this article as:: Cascino, S. & Gassen, J. Rev Account Stud (2015) 20: 242. doi:10.1007/s11142-014-9296-5

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Abstract

We investigate the effects of mandatory International Financial Reporting Standards (IFRS) adoption on the comparability of financial 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 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 these compliance determinants to explain the variance in the comparability effect of mandatory IFRS adoption and find 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.

Keywords

International accountingIFRSComparabilityComplianceReporting incentives

JEL Classification

M41M48G14

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Authors and Affiliations

Stefano Cascino
- 1
Joachim Gassen
- 2
Email author

1.Department of AccountingLondon School of EconomicsLondonUK
2.Wirtschaftswissenschaftliche Fakultät, Center for Applied Statistics and EconomicsHumboldt-Universität zu BerlinBerlinGermany

What drives the comparability effect of mandatory IFRS adoption?

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