Relaxing the Reconciliation Requirement in Non-U.S. Firms' SEC Filings: Firm Incentives and Changes in Earnings Informativeness, and Earnings Attributes

50 Pages Posted: 21 Oct 2010 Last revised: 18 Nov 2013

See all articles by Bowe Hansen

Bowe Hansen

Virginia Commonwealth University

Grace Pownall

Emory University - Department of Accounting

Rachna Prakash

University of Mississippi - Patterson School of Accountancy

Maria Vulcheva

Florida International University

Date Written: September 18, 2012

Abstract

We investigate the changes in earnings information content and earnings attributes, for non-U.S. firms listed in U.S. equity markets, following the 2007 relaxation of the SEC requirement to reconcile IFRS earnings and stockholders’ equity to U.S. GAAP in annual regulatory filings. We analyze a sample of non-U.S. firms listed on U.S. exchanges that use IFRS, domestic GAAP, or U.S. GAAP from 2005 to 2008. Prior literature finds no changes in informativeness following the regulation for IFRS-using firms. However, when we partition the IFRS-using firms into two groups based on managers’ incentives to provide informative disclosures, we find that those firms with incentives to be more informative had significant increases in the information content of their earnings. Furthermore, we do not find any decrease in information content of earnings for firms without such incentives. We also document that this change in earnings informativeness was contemporaneous with a change in earnings attributes.

Suggested Citation

Hansen, Thomas Bowe and Pownall, Grace and Prakash, Rachna and Vulcheva, Maria, Relaxing the Reconciliation Requirement in Non-U.S. Firms' SEC Filings: Firm Incentives and Changes in Earnings Informativeness, and Earnings Attributes (September 18, 2012). Journal of Accounting and Public Policy, Forthcoming; Emory Public Law Research Paper No. 10-134; Emory Law and Economics Research Paper No. 10-86. Available at SSRN: https://ssrn.com/abstract=1694498 or http://dx.doi.org/10.2139/ssrn.1694498

Thomas Bowe Hansen (Contact Author)

Virginia Commonwealth University ( email )

Richmond, VA 23284
United States

Grace Pownall

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States

Rachna Prakash

University of Mississippi - Patterson School of Accountancy ( email )

200 Conner Hall
University, MS 38677
United States

Maria Vulcheva

Florida International University ( email )

11200 SW 8 Street RB244B
Miami, FL 33199
United States

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