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Does mandatory IFRS adoption affect large and small public firms' accounting quality differently? Evidence from Canada

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  • Wakil, Gulraze
  • Petruska, Karin A.

Abstract

Canada adopted International Financial Reporting Standards (IFRS) in 2011. We investigate the impact of this mandatory change by examining whether value relevance and non-market-based accounting information changed for a comprehensive set of Canadian companies on the Toronto Stock Exchange (TSX). Our findings reveal the effects of IFRS adoption are not consistent across all firms as demonstrated by a minimal change in value relevance for large firms, but a significant increase for small firms. These differences are primarily attributed to the weakening (strengthening) relationship of book value to stock price for large (small) firms and a strengthening (weakening) relationship of earnings to stock price for large (small) firms. This suggests the goal of IFRS in providing improvement to the balance sheet is only achieved for small firms in Canada. For the non-market-based accounting quality measures of earnings persistence, earnings smoothing, earnings discretion, and the frequency of small profits to losses, the findings are mixed for large firms, but improve for small firms after IFRS adoption.

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  • Wakil, Gulraze & Petruska, Karin A., 2022. "Does mandatory IFRS adoption affect large and small public firms' accounting quality differently? Evidence from Canada," Advances in accounting, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:advacc:v:57:y:2022:i:c:s0882611022000177
    DOI: 10.1016/j.adiac.2022.100598
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    More about this item

    Keywords

    IFRS; Accounting quality; Value relevance; Book value; Canada;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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