Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/48427 
Year of Publication: 
2009
Series/Report no.: 
Working Paper No. 2009-09
Publisher: 
Technische Universität München, Center for Entrepreneurial and Financial Studies (CEFS), München
Abstract: 
We revisit evidence whether incentives or IFRS drive earnings quality changes, analyzing a large sample of German firms in the period from 1998 to 2008. Consistent with previous studies we find that voluntary and mandatory adopters differ distinctively in terms of essential firm characteristics and that size, leverage, age, bank ownership and ownership concentration influenced the decision to voluntarily adopt IFRS. However, regardless of the decision to voluntarily adopt IFRS, we find that conditional conservatism increased under IFRS for both groups of adopters, while evidence does not suggest an increase in value relevance under IFRS. Results on earnings management in the post-adoption period are mixed. While income smoothing decreases for voluntary but not for mandatory adopters, discretionary accruals only decrease for mandatory but not for voluntary adopters. However, further analyses suggest that the capital market environment and the economic cycle during the adoption period seem to be a more powerful explanation for this evidence than voluntary or mandatory IFRS adoption. Therefore, we conclude that incentives to voluntarily adopt IFRS did not unambiguously dominate accounting standards in determining earnings quality in the case of German firms.
Subjects: 
IAS regulation
IFRS
corporate ownership structures
insider ownership
incentives
earnings quality
JEL: 
G14
M4
Document Type: 
Working Paper

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