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http://ssrn.com/abstract=1754504
 
 

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IFRS Consequences on Accounting Conservatism Within Europe: The Role of Big 4 Auditors


Charles Piot


University of Grenoble Alpes; French National Center for Scientific Research (CNRS) - Centre de Recherches Appliquées à la Gestion (CERAG)

Pascal Dumontier


University of Grenoble; French National Center for Scientific Research (CNRS) - Centre de Recherches Appliquées à la Gestion (CERAG)

Rémi Janin


University of Grenoble and CERAG-CNRS

August 2011


Abstract:     
We investigate the effects of IFRS adoption in the EU on accounting conservatism, a feature of earnings quality and contracting efficiency, and the way large audit firms (Big 4) moderate these effects. We use an extensive database of more than 5,000 IFRS adopters from 22 EU countries, observed over 2001-2008. The main findings are that: 1) conditional conservatism, as proxied by the asymmetric timeliness of bad vs. good news, has decreased under IFRS for mandatory adopters; 2) the magnitude of this IFRS effect is positively associated with the distance between IFRS and pre-existing local GAAP; 3) Big 4 auditors are associated with more aggressive earnings under IFRS, with simultaneous increase (decrease) in good (bad) news timeliness; 4) unconditional conservatism is higher under IFRS in the presence of a Big 4 auditor; and 5) mandated IFRS offer a weak contribution to a better comparability of accounting earnings as observed from the timeliness perspective. Taken together, these findings suggest that the EU-wide mandatory IFRS adoption has hampered accounting quality.

Number of Pages in PDF File: 55

Keywords: Mandatory IFRS adoption, Earnings Quality, Conservatism, Big 4 Audits, European Union

JEL Classification: M48, M41, M42

working papers series


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Date posted: February 4, 2011 ; Last revised: September 5, 2011

Suggested Citation

Piot, Charles and Dumontier, Pascal and Janin, Rémi, IFRS Consequences on Accounting Conservatism Within Europe: The Role of Big 4 Auditors (August 2011). Available at SSRN: http://ssrn.com/abstract=1754504 or http://dx.doi.org/10.2139/ssrn.1754504

Contact Information

Charles Piot (Contact Author)
University of Grenoble Alpes ( email )
Grenoble Cedex 9, F-38040
France
French National Center for Scientific Research (CNRS) - Centre de Recherches Appliquées à la Gestion (CERAG)
150 rue de la Chimie, BP47
Grenoble Cedex 9, 38040
France
Pascal Dumontier
University of Grenoble ( email )
Grenoble
France
French National Center for Scientific Research (CNRS) - Centre de Recherches Appliquées à la Gestion (CERAG)
150 rue de la Chimie, BP47
Grenoble Cedex 9, 38040
France
Rémi Janin
University of Grenoble and CERAG-CNRS ( email )
IUT2, Place de Verdun
Grenoble, 38000
France
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