International Accounting Standards and Accounting Quality
Mary E. Barth
Stanford University - Graduate School of Business
Wayne R. Landsman
University of North Carolina Kenan-Flagler Business School
Mark H. Lang
University of North Carolina at Chapel Hill
September 1, 2007
Stanford University Graduate School of Business Research Paper No. 1976
We examine whether application of International Accounting Standards is associated with higher accounting quality. The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the post-adoption differences. We also find that firms applying IAS generally evidence an improvement in accounting quality between the pre- and post-adoption periods. Although we cannot be sure that our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate the effects of both.
Number of Pages in PDF File: 55
Keywords: IAS, IASB, International Accounting Standards, International Accounting Standards Board, International Financial Reporting Standards
JEL Classification: G12, G15, M41, M47
Date posted: April 11, 2005
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