TY - JOUR

T1 - IFRS Adoption, Reporting Incentives, and Financial Reporting Quality in Private Firms

AU - Bassemir, Moritz

AU - Novotny-Farkas, Zoltan

N1 - This is the peer reviewed version of the following article:Bassemir M, Novotny‐Farkas Z. IFRS adoption, reporting incentives and financial reporting quality in private firms. J Bus Fin Acc. 2018;45:759–796. https://doi.org/10.1111/jbfa.12315 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jbfa.12315/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

PY - 2018/7

Y1 - 2018/7

N2 - This study examines financial reporting quality (FRQ) effects around voluntary International Financial Reporting Standards (IFRS) adoptions by German private firms across two important dimensions, earnings quality and disclosure practices. To capture differences in the motivations for IFRS adoptions, we identify four different types of IFRS adopting firms based on a comprehensive set of firm characteristics. We observe earnings quality improvements around IFRS adoptions primarily for one type of firms, which are young, fast growing and seeking access to public equity markets. Using a matched sample of private German GAAP and IFRS reporting firms, we find some evidence suggesting that IFRS also contribute to higher earnings quality. Recognizing that our earnings quality metrics are only incomplete measures of FRQ, we also compare the disclosure practices of IFRS and German GAAP firms. We find that all IFRS firm types disclose significantly more information in their financial reports and show a higher propensity to publish their financial reports voluntarily on the corporate website. Our findings indicate that failure to identify earnings quality changes around IFRS adoption cannot be automatically interpreted as IFRS adoption having no effect on the FRQ of (private) firms. Collectively, our results suggest that both incentives and accounting standards shape private firms’ FRQ.

AB - This study examines financial reporting quality (FRQ) effects around voluntary International Financial Reporting Standards (IFRS) adoptions by German private firms across two important dimensions, earnings quality and disclosure practices. To capture differences in the motivations for IFRS adoptions, we identify four different types of IFRS adopting firms based on a comprehensive set of firm characteristics. We observe earnings quality improvements around IFRS adoptions primarily for one type of firms, which are young, fast growing and seeking access to public equity markets. Using a matched sample of private German GAAP and IFRS reporting firms, we find some evidence suggesting that IFRS also contribute to higher earnings quality. Recognizing that our earnings quality metrics are only incomplete measures of FRQ, we also compare the disclosure practices of IFRS and German GAAP firms. We find that all IFRS firm types disclose significantly more information in their financial reports and show a higher propensity to publish their financial reports voluntarily on the corporate website. Our findings indicate that failure to identify earnings quality changes around IFRS adoption cannot be automatically interpreted as IFRS adoption having no effect on the FRQ of (private) firms. Collectively, our results suggest that both incentives and accounting standards shape private firms’ FRQ.

KW - financial reporting quality

KW - international financial reporting standards (IFRS)

KW - private firms

KW - reporting incentives

U2 - 10.1111/jbfa.12315

DO - 10.1111/jbfa.12315

M3 - Journal article

VL - 45

SP - 759

EP - 796

JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

SN - 0306-686X

IS - 7-8

ER -