IDEAS home Printed from https://ideas.repec.org/a/taf/rcjaxx/v4y2016i3p236-262.html
   My bibliography  Save this article

Mandatory IFRS Adoption, Accounting Quality, and Investment Efficiency: Evidence from China

Author

Listed:
  • Qingchuan Hou
  • Qinglu Jin
  • Lanfang Wang
  • Guochang Zhang

Abstract

This paper investigates changes in accounting quality (AQ) and corporate investment efficiency around the mandatory adoption of International Financial Reporting Standards (IFRS) in China in 2007. We find that Chinese firms experience an overall decline in both AQ (measured by accrual characteristics) and investment efficiency post-IFRS relative to pre-IFRS. There are both similarities and differences in how IFRS impacts investment behaviour between state-owned enterprises (SOEs) and non-SOEs which are confronted with distinct agency problems. Specifically, both under- and over-investment problems are aggravated among SOEs, whereas among non-SOEs only under-investment worsens, not over-investment. We also find that for both SOEs and non-SOEs, declines in investment efficiencies are concentrated on firms with more severe AQ drops. We rationalise these findings in the context of the various agency problems faced by Chinese firms, and infer that mandatory IFRS adoption has led to deteriorating reporting quality and real investment efficiency in China’s transitional economy.

Suggested Citation

  • Qingchuan Hou & Qinglu Jin & Lanfang Wang & Guochang Zhang, 2016. "Mandatory IFRS Adoption, Accounting Quality, and Investment Efficiency: Evidence from China," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 4(3), pages 236-262, July.
    • Handle: RePEc:taf:rcjaxx:v:4:y:2016:i:3:p:236-262
    DOI: 10.1080/21697213.2016.1218632
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/21697213.2016.1218632
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/21697213.2016.1218632?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rcjaxx:v:4:y:2016:i:3:p:236-262. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rcja .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.