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International Accounting Standards and Accounting Quality

55 Pages Posted: 11 Apr 2005  

Mary E. Barth

Stanford University - Graduate School of Business

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Mark H. Lang

University of North Carolina at Chapel Hill

Date Written: September 1, 2007

Abstract

We examine whether application of International Accounting Standards is associated with higher accounting quality. The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the post-adoption differences. We also find that firms applying IAS generally evidence an improvement in accounting quality between the pre- and post-adoption periods. Although we cannot be sure that our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate the effects of both.

Keywords: IAS, IASB, International Accounting Standards, International Accounting Standards Board, International Financial Reporting Standards

JEL Classification: G12, G15, M41, M47

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Lang, Mark H., International Accounting Standards and Accounting Quality (September 1, 2007). Stanford University Graduate School of Business Research Paper No. 1976. Available at SSRN: https://ssrn.com/abstract=688041 or http://dx.doi.org/10.2139/ssrn.688041

Mary E. Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Mark H. Lang

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

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