IFRS Adoption and Within-Jurisdiction Comparability: Evidence from Chinese Dual-Class Firms

Posted: 16 Jul 2019

See all articles by Jenny Xinjiao Guan

Jenny Xinjiao Guan

Monash University

Kangtao Ye

Renmin University of China - School of Business

Shanshan Zhang

Beijing Jiaotong University

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group; China Academy of Financial Research (CAFR)

Date Written: July 15, 2019

Abstract

We analyze a unique set of Chinese firms to isolate the effect of accounting standards on within-jurisdiction comparability. A sample of Chinese firms simultaneously maintain two sets of financial statements over the period of 2001-2006 because of their dual-class share structure: statements for A-shares follow Chinese GAAP and those for B-shares follow IFRS. We find a disparity in within-jurisdiction accounting comparability between these two sets of accounting standards: IFRS produces less comparable information within jurisdiction than does Chinese GAAP. We also find that the disparity in comparability is related to fair value accounting, especially when corporate governance is weak. Further, we find that comparability disparity incurs capital market consequence. Disparity in comparability is associated with the differences in stock price and liquidity between A- and B-shares. Our study has implications for the effects of IFRS adoption on overall comparability in general and within-jurisdiction comparability in particular. Our study suggests that a country has to trade off the loss from impaired within-jurisdiction comparability against the benefit from enhanced cross-jurisdiction comparability when considering IFRS adoption.

Keywords: IFRS Adoption; Within-Jurisdiction Comparability; Capital Market Performance

JEL Classification: M41; G12

Suggested Citation

Guan, Jenny Xinjiao and Ye, Kangtao and Zhang, Shanshan and Zhang, Xiao-Jun, IFRS Adoption and Within-Jurisdiction Comparability: Evidence from Chinese Dual-Class Firms (July 15, 2019). Available at SSRN: https://ssrn.com/abstract=3419872

Jenny Xinjiao Guan (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Kangtao Ye

Renmin University of China - School of Business ( email )

Beijing
China

Shanshan Zhang

Beijing Jiaotong University ( email )

No.3 of Shangyuan Residence Haidian District
Beijing, 100089
China

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group ( email )

545 Student Services Building
SPC 1900
Berkeley, CA 94720
United States
(510) 642-4789 (Phone)
(510) 642-4700 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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