The Effect of Economic Integration on Accounting Comparability: Evidence from the Adoption of the Euro

35 Pages Posted: 30 Jun 2013

See all articles by Sudarshan Jayaraman

Sudarshan Jayaraman

University of Rochester - Simon Business School; Simon Business School, University of Rochester

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

Date Written: June 28, 2013

Abstract

We examine the effect of economic integration on accounting comparability. Using the adoption of the euro as a shock to economic integration, we document two effects. First, we show a direct effect around the adoption of the euro – accounting comparability increases among industries in adopting countries relative to those in non-adopting ones and this effect is driven by increases in arm’s length financing. Second, economic integration also has an interactive effect, by influencing the effect of accounting standards harmonization (proxied by IFRS adoption) on accounting comparability. Specifically, the effect of IFRS adoption on accounting comparability is approximately three times larger for euro members than it is for non-euro members. Our paper highlights the role of economic integration and its interplay with accounting standards harmonization in shaping accounting comparability.

Keywords: Accounting comparability, Euro, European Union, accounting standard, reporting incentives

JEL Classification: M41, G15

Suggested Citation

Jayaraman, Sudarshan and Jayaraman, Sudarshan and Verdi, Rodrigo S., The Effect of Economic Integration on Accounting Comparability: Evidence from the Adoption of the Euro (June 28, 2013). Available at SSRN: https://ssrn.com/abstract=2286699 or http://dx.doi.org/10.2139/ssrn.2286699

Sudarshan Jayaraman

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States
585-275-3491 (Phone)

Simon Business School, University of Rochester ( email )

Rochester, NY 14627
United States
585-275-3491 (Phone)

Rodrigo S. Verdi (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
315
Abstract Views
3,097
rank
135,483
PlumX Metrics