Empirical Value Relevance of German Gaap and IFRS

Journal of Economic and Financial Sciences, Vol. 1, No. 2, pp. 141-170, October 2007

Posted: 12 Sep 2007 Last revised: 24 Jun 2008

See all articles by Alexander Schiebel

Alexander Schiebel

Vienna University of Economics and Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: August 2007

Abstract

It seems logical to assume that GAAP aimed at informing investors show a higher association with share prices (value relevance) than GAAP aimed at protecting creditors. The majority of empirical studies support this assumption. This paper examines the value relevance of IFRS and German GAAP. Regression analyses are applied to companies listing on the Frankfurt Stock Exchange and publishing exclusively either IFRS or German GAAP consolidated financial reports over the period 2000-2004. As a result of Regulation (EC) No 1606/2002, comparative research becomes impossible after 2004: German GAAP will no longer exist on European stock exchanges. The paper's study is restricted to a single capital market in order to eliminate pricing differences between capital markets based in different countries; that has already been done in earlier research. Improved circumstances for investigating value relevance compared with earlier research are, however, the selection criteria for the listed companies (emphasis on international transparency requirements, free float and free float market capitalisation) and the share prices used (average price around the end of the business year when the financial reporting data is not yet published). The results of the study show that German GAAP is significantly more value relevant statistically than IFRS. These results have to be interpreted in the light of the selection criteria. It is an unexpected outcome calling for further research.

Keywords: conservatism, German GAAP, IFRS, capital market, value relevance

JEL Classification: G12, M41, M44, M47

Suggested Citation

Schiebel, Alexander, Empirical Value Relevance of German Gaap and IFRS (August 2007). Journal of Economic and Financial Sciences, Vol. 1, No. 2, pp. 141-170, October 2007. Available at SSRN: https://ssrn.com/abstract=1013269

Alexander Schiebel (Contact Author)

Vienna University of Economics and Business Administration ( email )

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0043 1 31336 4606 (Phone)
0043 1 31336 718 (Fax)

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