An Empirical Study of the Method Effect in Analysing the Adoption of IFRS

Abstract

This study investigates the consequences of using different methods when making conclusions about the effect of IFRS. The study's contribution is related to the suggestion that research design must be considered when analysing the results of prior studies on the adoption of IFRS. In summary, our results demonstrate that the impact of IFRS on accounting quality measured as financial analysts' information environment depends on the model used. Using the same model as in prior research (the BKLS model) our results confirm earlier studies that IFRS adoption improves the information environment for analysts. However, when using a more sophisticated model no such improvement can be found.

Impact of IFRS on the quality of financial information in the United Kingdom and France: Evidence from a new perspective

“…As evidenced by the results, larger companies in the United Kingdom experience a benefit from the implementation of IFRS that their peers in France do not after adopting these standards. This coincides with what was expected by Hypothesis 2 and with various studies that make note of the advantages when implementing IFRS in countries such as the United Kingdom, with a Common Law system and strict rigor in the application of accounting standards; just the opposite occurs in countries like France, which have a Civil Code system and less rigor in the application of accounting norms (Daske et al, 2008;Doukakis, 2014;Jeanjean & Stolowy, 2008;Liao et al, 2012;Soderstrom & Sun, 2007;Van Tendeloo & Vanstraelen, 2005;Von Koch et al, 2014).…”

“…Likewise, it is worthwhile to stress that one of the most common measures used to assess the quality of financial information is EM, which is negatively associated with the quality of financial information (Barth et al, 2008;Soderstrom & Sun, 2007;Von Koch et al, 2014). Accordingly, Barth et al (2008) conducted a study on 21 developed and emerging countries (which included Switzerland, China and Germany, among others), their findings indicate that the implementation of IFRS is negatively associated with EM.…”

“…In addition to the above, various authors have also concluded that the impact of the implementation of IFRS depends on external factors that may be specific to each country (Brüggemann et al, 2013;Daske et al, 2008;Doukakis, 2014;Jeanjean & Stolowy, 2008;Liao et al, 2012;Soderstrom & Sun, 2007;Von Koch et al, 2014). Among the most important elements that affect the IFRS are laws and regulations that have been passed prior to their implementation, the political and legal system, the rigor with which the accounting standards are applied, property structures, mechanisms of corporate governance, economic development, the importance of the capital markets and similarity between the generally accepted accounting principles and the IFRS.…”

“…The choice of these countries is justified by the fact that they did not allow the voluntary adoption of the IFRS prior to 2005, since as established by other research (Barth et al, 2008;Doukakis, 2014;Jeanjean & Stolowy, 2008), studies on the adoption of IFRS can include a selection bias by studying countries that permitted the voluntary adoption of these standards. Furthermore, the United Kingdom and France exhibit large differences in terms of their legal systems and the rigor with which they apply accounting standards, factors which have been identified as far-reaching when it comes to evaluating the effect the adoption of IFRS can have on the quality of the financial information (Brüggemann et al, 2013;Daske et al, 2008;Doukakis, 2014;Jeanjean & Stolowy, 2008;Liao, Sellhorn & Skaife, 2012;Soderstrom & Sun, 2007;Von Koch, Nilsson, Jonsson & Jansson, 2014).…”