Review of Quantitative Finance and Accounting

, Volume 36, Issue 2, pp 207–245 | Cite as

Accounting and stock market effects of international accounting standards adoption in an emerging economy

Original Research


This study examines the impact of the mandatory adoption of the 1997 and 2006 Egyptian accounting standards on earnings quality and firm valuation. Extant research finds that IAS-based standards have positive effects on financial statement attributes (e.g., earnings management) and capital market-related variables (e.g., firm valuation) in some countries, and negative or neutral effects in others. Research conducted in this area on emerging markets is scant, and none in Egypt, which has adopted in 1997 an IAS-based standards (later revised twice in 2002 and 2006). Using a sample of Egyptian listed firms around the time of introducing the 1997 and 2006 EAS versions, I find insignificant empirical evidence that earnings management decreases post adoption of each of the EAS versions under investigation. Additionally, I find that firm valuation (Tobin’s q) was significantly negatively affected by both EAS versions under investigation in this study. I attribute these results to the lack of compliance by financial statement preparers, improper regulatory enforcement mechanisms, the poor accounting infrastructure, and the inadequate practitioner training, claimed by prior literature.


International accounting standards International financial reporting standards Earnings quality Tobin’s q Accruals Emerging markets Egypt 

JEL Classification

M41 F21 



The author would like to thank Vivian Mehana, Magdy Samy, the participants of the 2009 AAA Annual Meeting and two anonymous reviewers for their insightful comments that helped shape this paper into this publishable form.


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© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of Accounting, Faculty of CommerceCairo UniversityGizaEgypt

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