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The impact of mandatory IFRS adoption on the earnings--returns relation

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  • Wensheng Kang

Abstract

This study investigates the impact of mandatory International Financial Reporting Standards (IFRS) adoption on the value relevance of financial reports in 13 European countries by comparing the earnings--returns relation pre- and post-IFRS mandatory adoption in 2005. It shows that the financial reporting convergence enhances the contemporaneous association between earnings and returns, consistent with investors' expecting net information quality benefits from the IFRS adoption. While the reduction of price leading return effects documented in Ali and Hwang (2000) is more pronounced for a country with less discrepancy between local generally accepted accounting principles and IFRS, the legal system and aggregate earnings management within that country do not significantly deteriorate the positive value-relevance reaction to mandatory IFRS adoption in Europe.

Suggested Citation

  • Wensheng Kang, 2013. "The impact of mandatory IFRS adoption on the earnings--returns relation," Applied Financial Economics, Taylor & Francis Journals, vol. 23(13), pages 1137-1143, July.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:13:p:1137-1143
    DOI: 10.1080/09603107.2013.797557
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    Cited by:

    1. Begoña Giner & Francisca Pardo, 2018. "The Value Relevance of Operating Lease Liabilities: Economic Effects of IFRS 16," Australian Accounting Review, CPA Australia, vol. 28(4), pages 496-511, December.
    2. Ines Kateb & Ines Belgacem, 2024. "Navigating governance and accounting reforms in Saudi Arabia's emerging market: impact of audit quality, board characteristics, and IFRS adoption on financial performance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 290-312, June.

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