Does eliminating the Form 20-F reconciliation from IFRS to U.S. GAAP have capital market consequences?

Kim, Yongtae; Li, Haidan; Li, Siqi

doi:10.1016/j.jacceco.2011.05.001

Cited by 68 publications

(46 citation statements)

References 86 publications

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“…Their results suggest that 20-F reconciliations provide useful information to at least a subset of firms and that the elimination of these reconciliations may impose an information loss on less sophisticated investors. Kim, Li, and Li (2012) examine the stock market consequences of the SEC's decision in 2007…”

Section: Evidence From Mandatory Adoptionmentioning

confidence: 99%

A review of the IFRS adoption literature

2016

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Section: Evidence From Mandatory Adoptionmentioning

confidence: 99%

A review of the IFRS adoption literature

2016

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“…Value Line). The EU analyses commonly use data available in I/B/E/S (e.g., Kim et al, 2012;Li, 2010) and are therefore not able to estimate some ICC measures compared in the previous cited studies (e.g., ). As a result, in order to avoid or mitigate some biases highlighted in the literature, many empirical studies have used an average of various ICC models (e.g., Daske et al, 2008;Hail and Leuz, 2006).…”

Section: Cost Of Equity Measurementmentioning

confidence: 99%

Economic consequences of key performance indicators' disclosure quality

Elzahar

Hussainey

Mazzi

et al. 2015

International Review of Financial Analysis

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Starting from 2006, UK listed companies are required to analyse their performance by using Key Performance Indicators (KPIs) in specific sections of their annual reports and the UK Accounting Standard Board (ASB) provides companies with guidelines for the best practice regarding KPI disclosure. Motivated by the possible effects of the KPI disclosure quality, we examine their potential economic consequences for a sample of UK listed firms for the period 2006 to 2010. Our sample consists of 448 firm-year observations. We first develop a measure for the quality of the KPI disclosure based on the ASB's guidelines. We then test the economic consequences of financial and nonfinancial KPIs disclosure quality both separately and combined into one variable. Our findings, after conducting various sensitivity tests, suggest that only the disclosure quality of financial KPIs matters. We find a significantly negative (weakly positive) relationship between disclosure quality of financial KPIs and the implied cost of capital (firm value). These results inform regulatory bodies as well as the academic literature about the potential economic consequences of this type of disclosure.

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“…Their results also find no support for the notion that the elimination has a significant impact on cost of equity, analysts' forecast error, bias and dispersion, institutional ownership, and stock price efficiency and synchronicity, implying that there is no informational loss or greater information asymmetry as a result of the rule change. Kim et al (2012)'s findings, however, are inconsistent with Han and He (2013) that document significant increases in foreign firms' cost of equity in the period that the SEC permits the use of IFRS reporting. In addition, Hansen, Pownall, Prakash, and Vulcheva (2012) find that IFRS filers with stronger incentives to provide informative disclosures experienced significant increases in the information content of their earnings after the elimination of the reconciliation requirement.…”

Section: Sec's Waiver Of Ifrs To Us Gaap Reconciliationmentioning

confidence: 60%

“…However, the authors do find that the removal of the reconciliation requirement could have the beneficial effect of significantly accelerating financial reporting. Kim, Li, and Li (2012) provide no evidence that IFRS-reporting firms experience a greater change in market liquidity and the probability of informed trading in the year after the elimination, relative to firms that do not adopt IFRS. Their results also find no support for the notion that the elimination has a significant impact on cost of equity, analysts' forecast error, bias and dispersion, institutional ownership, and stock price efficiency and synchronicity, implying that there is no informational loss or greater information asymmetry as a result of the rule change.…”

Section: Sec's Waiver Of Ifrs To Us Gaap Reconciliationmentioning

confidence: 75%

Does the SEC's Waiver of IFRS to U.S. GAAP Reconciliation Improve the Quality of Financial Reporting?

Chao

Horng

2013

AFR

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This paper compares accounting-quality metrics for foreign firms before and after the SEC waived the reconciliation requirement for IFRS firms. We find that foreign issuers applying IFRS exhibit more income smoothing and less timely recognition of losses than do foreign firms filing U.S. GAAP reconciliations in the IFRS reporting period. However, we also find that accounting amounts are more value relevant for IFRS firms than their counterparts. Differences in accounting quality between the two sets of firms in the U.S. GAAP reconciliation period do not account for the IFRS reporting-period differences. Our findings also document that foreign firms filing U.S. GAAP reconciliations experience a greater improvement in accounting quality in terms of less earnings smoothing and more timely recognition of losses than do foreign issuers adopting IFRS between the U.S. GAAP reconciliation and IFRS reporting periods. Overall, the combined evidence suggests that application of IFRS by non-U.S. firms has not enhanced financial reporting comparability with firms filing U.S. GAAP reconciliations. The above implications are robust to a number of alternative specifications.

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Does eliminating the Form 20-F reconciliation from IFRS to U.S. GAAP have capital market consequences?

Cited by 68 publications

References 86 publications

A review of the IFRS adoption literature

A review of the IFRS adoption literature

Economic consequences of key performance indicators' disclosure quality

Does the SEC's Waiver of IFRS to U.S. GAAP Reconciliation Improve the Quality of Financial Reporting?

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