Economic Consequences of Accounting Enforcement Reforms: The Case of Germany

Ernstberger, Jürgen; Stich, Michael; Vogler, Oliver

doi:10.1080/09638180.2011.628096

Cited by 81 publications

(78 citation statements)

References 76 publications

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“…In addition to these four matters, we add to prior studies of accounting enforcement that are based on one country only (e.g., Dechow et al., ; Ernstberger et al., ; and Hitz et al., ) by conducting our investigation on a number of countries. We build on Christensen et al () by showing the importance of accounting enforcement with a proxy that includes many elements of the activities of enforcement bodies rather than one, albeit major, element (in their case, commencing proactive enforcement in 2005).…”

Section: Introductionmentioning

confidence: 99%

A Comparison of Between‐Country Measures of Legal Setting and Enforcement of Accounting Standards

Preiato¹,

Brown²,

Tarca

2015

Business Fin & Account

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Academics and practitioners agree that the enforcement of accounting standards has an important role in promoting high quality financial reporting and favourable capital market outcomes. We test three new enforcement proxies from Brown, Preiato and Tarca (2014) that focus specifically on auditing and accounting enforcement. We examine firms’ information environments, represented by the error in analysts’ consensus forecasts and the extent of disagreement among analysts, as indicated by forecast dispersion. For financial years ending from 2003 to 2009, we construct a sample of 357,034 firm–month observations on the errors and dispersion of analysts’ earnings forecasts for 10,769 firms domiciled in those 39 countries. We find that higher scores for all three proxies are associated with lower error and less disagreement in forecasts. In addition, we find that the indices have significant explanatory power when previously used enforcement proxies (such as Kaufmann et al.'s 2010 rule of law measure) are included in the regression models, pointing to the importance of specific measures of accounting enforcement. We conclude that accounting enforcement may be more important in securing favourable economic outcomes than has been previously realised, because researchers commonly have used noisier, more general legal proxies for enforcement that understate its marginal effects.

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Section: Introductionmentioning

confidence: 99%

A Comparison of Between‐Country Measures of Legal Setting and Enforcement of Accounting Standards

Preiato¹,

Brown²,

Tarca

2015

Business Fin & Account

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“…See Hope [], Ernstberger, Stich, and Vogler [], Christensen, Hail, and Leuz [], Brown, Preiato, and Tarca [], and Silvers [].…”

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confidence: 99%

Effects of Increasing Enforcement on Financial Reporting Quality and Audit Quality

Ewert

Wagenhofer

2019

J of Accounting Research

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A widely held assumption in policy making and empirical research is that increasing the strength of public enforcement improves financial reporting quality and audit quality. This paper provides a more nuanced view. In a model with a manager who can manage earnings, a strategic auditor, and an enforcement institution, we show that enforcement and auditing are complements in a weak enforcement regime but can be substitutes in a strong regime. Although stronger enforcement always mitigates earnings management, the effects of different instruments of strengthening enforcement are ambiguous. We show that they can improve or impair financial reporting quality and audit quality, depending on production risk, accounting system characteristics, and the scope of auditing relative to enforcement.

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“…Other papers that examine the relationship between bid‐ask spreads and IFRS adoption include Platikanova and Nobes () and Platikanova () who examine EU countries, Ernstberger et al . () and Gassen et al . () who report evidence for Germany.…”

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confidence: 85%

Information Disclosure and Stock Liquidity: Evidence fromBorsaItaliana

Frino

Palumbo

Capalbo

et al. 2013

Abacus

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This article examines the effect of increased corporate information disclosure on stock liquidity. Using the adoption of International Financial Reporting Standards (IFRS) in Italy as a natural experiment we extend previous work examining the effect on one measure of liquidity-bid-ask spreads-to others, specifically depth and the price impact of transactions (or effective bid-ask spreads). Consistent with previous research we find that bid-ask spreads of stocks decline following the introduction of IFRS, which implies that stock liquidity increases for small traders. However, we also provide evidence that depth at the best quotes declines, which challenges the proposition that liquidity increases for large trades following an increase in disclosure. In additional tests, we find that effective bid-ask spreads of block trades also decline following the introduction of IFRS. Overall, this evidence confirms that stock liquidity for both small and large trades increases following an increase in corporate information disclosure.

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Economic Consequences of Accounting Enforcement Reforms: The Case of Germany

Cited by 81 publications

References 76 publications

A Comparison of Between‐Country Measures of Legal Setting and Enforcement of Accounting Standards

A Comparison of Between‐Country Measures of Legal Setting and Enforcement of Accounting Standards

Effects of Increasing Enforcement on Financial Reporting Quality and Audit Quality

Information Disclosure and Stock Liquidity: Evidence fromBorsaItaliana

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