Applying IFRS in Germany: Determinants and Consequences

38 Pages Posted: 7 Jun 2006

See all articles by Joachim Gassen

Joachim Gassen

Humboldt University of Berlin - School of Business and Economics; TRR 266 Accounting for Transparency

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich

Multiple version iconThere are 2 versions of this paper

Date Written: July 2006


We address three research questions motivated by the recent ascent of International Financial Reporting Standards (IFRS) in Europe. First, analyzing the determinants of voluntary IFRS adoption by publicly traded German firms during the period 1998-2004, we find that size, international exposure, dispersion of ownership, and recent IPOs are important drivers. Second, using the results from this determinant model to construct propensity score-matched samples of IFRS and German-GAAP (HGB) firms, we document significant differences in terms of earnings quality: IFRS firms have more persistent, less predictable and more conditionally conservative earnings. Third, analyzing information asymmetry differences between IFRS and HGB firms, we show that IFRS adopters experience a decline in bid-ask spread of 70 base points and an average of 17 more days with price changes per year. On the other hand, IFRS adopter's stock prices seem to be more volatile. In the light of some important limitations of our study, we discuss IFRS-related research opportunities in post-2005 Europe.

Keywords: IFRS, earnings quality, earnings attributes, information asymmetry, standard setting, IAS Regulation, Europe, propensity-score matching, voluntary disclosure

JEL Classification: G14, M41, M43, M44, M47

Suggested Citation

Gassen, Joachim and Sellhorn, Thorsten, Applying IFRS in Germany: Determinants and Consequences (July 2006). Available at SSRN: or

Joachim Gassen (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
+49 30 2093 5764 (Phone)
+49 30 2093 5670 (Fax)

TRR 266 Accounting for Transparency

Warburger Straße 100
Paderborn, 33098

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich ( email )

Ludwigstr. 28 RG IV
Munich, Bavaria 80539
+49(0)89-21806264 (Phone)
+49(0)89-21806327 (Fax)


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

Paper statistics

Abstract Views
PlumX Metrics