Mandating IFRS in an Unfavorable Environment: The Greek Experience
Posted: 25 Mar 2010
Date Written: March 16, 2010
This paper assesses the impact of mandatory IFRS adoption in Greece. Our research is motivated by an ongoing debate about the efficacy of enforcing high quality accounting standards in controversial economies with unfavorable economic infrastructures. We perceive Greece as a representative unfavorable economy due to its code-law tradition, bank-orientation, concentrated corporate ownership, weak legal enforcement, poor shareholders’ protection and low regulatory quality. Provided that these circumstances negatively affect managers’ and auditors’ reporting incentives, simply mandating IFRS may prove to be an immaterial change if it is not combined with parallel improvements in other factors that influence the financial reporting system. To address our research question, we explore possible changes in two salient properties of accounting income that are in the forefront of accounting research over the last years: value relevance and conditional conservatism. Our results indicate only minor improvements in both of them after IFRS implementation.
Keywords: IFRS, Reporting Incentives, Value Relevance, Conditional Conservatism, Accounting Quality
JEL Classification: M41, G15
Suggested Citation: Suggested Citation