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http://ssrn.com/abstract=1754199
 
 

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Accounting Standards Harmonization and Financial Statement Comparability: Evidence from Transnational Information Transfer


Clare Wang


Northwestern University - Kellogg School of Management

March 28, 2014

Journal of Accounting Research, 2014, Forthcoming

Abstract:     
This paper investigates whether accounting standards harmonization enhances the comparability of financial information across countries. I hypothesize that a firm yet to announce earnings reacts more strongly to the earnings announcement of a foreign firm when both report under the same rather than different accounting standards. My analysis of abnormal price reactions for a global sample of firms supports the prediction. Next, in an attempt to control for the underlying economic comparability and the effects of changes in reporting quality, I use a difference-in-differences design around the mandatory introduction of International Financial Reporting Standards (IFRS). I find that mandatory adopters experience a significant increase in market reactions to the release of earnings by voluntary adopters compared to the period preceding mandatory adoption. This increase is not observed for non-adopters. Taken together, the results show that accounting standards harmonization facilitates transnational information transfer and suggest financial statement comparability as a direct mechanism.

Number of Pages in PDF File: 46

Keywords: Financial Statement Comparability, Information Transfer, IFRS, Accounting Standards Harmonization

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Date posted: February 4, 2011 ; Last revised: March 29, 2014

Suggested Citation

Wang, Clare, Accounting Standards Harmonization and Financial Statement Comparability: Evidence from Transnational Information Transfer (March 28, 2014). Journal of Accounting Research, 2014, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1754199 or http://dx.doi.org/10.2139/ssrn.1754199

Contact Information

Clare Wang (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847 491 2670 (Phone)
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