International Earnings Comparability

55 Pages Posted: 12 Sep 2007 Last revised: 31 Jan 2008

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Philip Joos

Tilburg University

Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus

Date Written: December 10, 2007


We investigate the comparability of accounting earnings for 14 EU countries in the period 1990-2005. Although prior studies have documented international differences in financial reporting properties, there is hardly any large-scale international evidence on the underlying fundamentals driving these differences. The European Union is a particularly interesting setting to study because of the substantial efforts to create a single economic market across countries. We focus on the accruals - cash flow association as in Ball and Shivakumar (2005; 2006) and show that accruals measurement is substantially affected by the business cycle stage and firm specific reporting incentives. Incentives arise from the equity capital market, debt financing and labor markets. These incentives are further intensified by the design of a country's institutional framework, such as stock market development, importance of bank financing and labor union membership. In addition, our results suggest that the mandatory introduction of IFRS in 2005 did not instantly bring about the expected improvement in earnings comparability across Europe. Our results provide important insights for the ongoing debate on standards versus incentives.

Keywords: accruals - cash flow, international accounting, reporting incentives

JEL Classification: G15, G32, K22, M41, M43, M47

Suggested Citation

Beuselinck, Christof and Joos, Philip and Van der Meulen, Sofie, International Earnings Comparability (December 10, 2007). Available at SSRN: or

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
+33320545892 (Phone)

Philip Joos

Tilburg University ( email )

School of Economics and Management
Warandelaan 2
Tilburg, 5000 LE
31 13 4668716 (Phone)
31 13 4668001 (Fax)


Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000

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