Does Mandatory IFRS Adoption Improve Information Comparability?

49 Pages Posted: 23 Apr 2012

See all articles by Rita Yip

Rita Yip

Lingnan University - Department of Accountancy

Danqing Young

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Date Written: January 17, 2012

Abstract

This study examines whether the mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union significantly improves information comparability in 17 European countries. We employ three proxies – the similarity of accounting functions, the degree of information transfer, and the similarity of the information content of earnings and of the book value of equity – to measure information comparability. Our results suggest that mandatory IFRS adoption improves cross-country information comparability by making similar things look more alike without making different things look less different. Our results also suggest that both accounting convergence and higher quality information under IFRS are the likely drivers of the comparability improvement. In addition, we find some evidence that cross-country comparability improvement is affected by firms’ institutional environment.

Keywords: IFRS adoption, information comparability, institutional environment

Suggested Citation

Yip, Rita and Young, Danqing Xu, Does Mandatory IFRS Adoption Improve Information Comparability? (January 17, 2012). Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2044295

Rita Yip (Contact Author)

Lingnan University - Department of Accountancy ( email )

201, Simon and Eleanor Kwok Buildng,
Lingnan University,
Tuen Mun, Hong Kong, 852
Hong Kong

Danqing Xu Young

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
+852 2609 7892 (Phone)
+852 2603 5114 (Fax)

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