Heterogeneity in earnings quality between different classes of companies after IFRS adoption: evidence from Brazil

Abstract

This paper aims to investigate the existence of heterogeneity in earnings quality between different classes of companies after the adoption of the International Financial Reporting Standards (IFRS). IFRS adoption is generally associated with an increase in the quality of financial statements. However, companies within the same country are likely to have different economic incentives regarding the disclosure of information. Thus, treating companies equally, without considering the related economic incentives, could contaminate earnings quality investigations. The case of Brazil is analyzed, which is a country classified as code-law, in which tax laws determined accounting practice and in which IFRS adoption is mandatory. First, Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) were separated into two classes: companies issuing American Depositary Receipts (ADRs) before IFRS adoption and companies that did not issue ADRs until the adoption of IFRS. Then, this second class of companies was grouped, using cluster analysis, into two different subclasses according to economic incentives. Based on the groups identified, the quality of accounting earnings is tested for each class of the companies before and after IFRS adoption. This paper uses timely recognition of economic events, value relevance of net income, and earnings management as proxies for the quality of accounting earnings. The results indicate that a particular class of companies began showing conditional conservatism, value relevance of net income, and lower earnings management after IFRS adoption. On the other hand, these results were not found for the two other classes of companies.

O Value Relevance é relevante?

“…A adoção das IFRS no Brasil permitiu a quebra da ligação entre as normas contábeis para fins da divulgação e as regras tributárias. A partir dessa quebra foi possível realizar mudanças significativas na prática contábil, pois antes as companhias optavam por abandonar práticas contábeis mais adequadas de acordo com a legislação societária para não ter que adiantar o pagamento de tributos (Black & Nakao, 2017). Com essa segregação entre as regras contábeis e tributárias foi possível atender melhor a necessidade de cada usuário da informação.…”

Relación entre indicadores económicos y precio de acciones en empresas brasileñas

“…Los resultados obtenidos sugieren que la información de indicadores económico-financieros más integrales ofrece una mayor explicación para el precio de las acciones en el segundo periodo (posconvergencia), lo que confirma el argumento de Da Silva Macedo et al (2012); Da Silva ; Lopes Santos (2015); Brunozi et al (2017); Ferreira et al (2015); Black y Nakao (2017).…”

“…Algunos estudios más abarcadores compararon el poder explicativo de la utilidad entre los periodos de preconvergencia (2003)(2004)(2005)(2006)(2007) y posconvergencia (2010)(2011)(2012)(2013)(2014), y demostraron un aumento de la calidad explicativa de este indicador en el segundo periodo de análisis (Ferreira, Lemes y Borges Forti, 2015;Santos, 2015;Black y Nakao, 2017).…”

Shares price in Brazilian agricultural sector

“…El mercado reacciona de forma más impetuosa ante la información emanada de la contabilidad luego de adoptadas la norma� va internacional (Gurgel & Lima, 2015;Black & Hiroshi, 2016), la u� lidad presentada en los informes fi nancieros es más cercana a la realidad económica circundante (Santos, Gerlando, Calheira & Siqueira, 2011;Landsman, Maydew & Thornock, 2012;Filipin, Teixeira, Bezerra & Da Cunha, 2012;Mar� ns, de Oliveira, Katasumi & Alves, 2014;Gonçalves et al, 2014).…”