TY - JOUR
T1 - IFRS Adoption among Private Companies: Impact on Earnings Quality
AU - Cameran, Mara
AU - Campa, Domenico
AU - Pettinicchio, Angela
AU - Pettinicchio, Angela Kate
PY - 2014
Y1 - 2014
N2 - EU gave the opportunity to each Member State to oblige/allow non-listed (i.e., private)
companies to use international financial reporting standards (IFRS). Considering a sample of
Italian private companies that switched to IFRS in the time span from 2005 to 2008, we
compare financial reporting quality between IFRS adopters and a matched sample of companies still using local (Italian) generally accepted accounting principles (GAAP). This should
be of interest for the EU Commission in evaluating the impact of the current financial
reporting regulation and for EU national regulators, who are left with a certain degree of
flexibility in endorsing parts of the European legislation. Overall, our results show that IFRS
adoption did not improve reporting quality among private companies but, on the contrary,
decreased it. As companies can exploit the level of flexibility embedded in IFRS to pursue
their own reporting interests, separate analyses were conducted taking into consideration
firms’ incentives. In particular, assuming that entities controlled by listed companies might
have switched to IFRS mainly for complying with parent company requirements and/or simplifying the financial reporting process, we run the analyses separately for this sub-sample
and other firms. Findings reveal signs of earnings quality deterioration for both groups
although the impact seems slightly worse for subsidiaries of listed companies
AB - EU gave the opportunity to each Member State to oblige/allow non-listed (i.e., private)
companies to use international financial reporting standards (IFRS). Considering a sample of
Italian private companies that switched to IFRS in the time span from 2005 to 2008, we
compare financial reporting quality between IFRS adopters and a matched sample of companies still using local (Italian) generally accepted accounting principles (GAAP). This should
be of interest for the EU Commission in evaluating the impact of the current financial
reporting regulation and for EU national regulators, who are left with a certain degree of
flexibility in endorsing parts of the European legislation. Overall, our results show that IFRS
adoption did not improve reporting quality among private companies but, on the contrary,
decreased it. As companies can exploit the level of flexibility embedded in IFRS to pursue
their own reporting interests, separate analyses were conducted taking into consideration
firms’ incentives. In particular, assuming that entities controlled by listed companies might
have switched to IFRS mainly for complying with parent company requirements and/or simplifying the financial reporting process, we run the analyses separately for this sub-sample
and other firms. Findings reveal signs of earnings quality deterioration for both groups
although the impact seems slightly worse for subsidiaries of listed companies
KW - IFRS
KW - private companies
KW - reporting incentives
KW - reporting quality
KW - IFRS
KW - private companies
KW - reporting incentives
KW - reporting quality
UR - http://hdl.handle.net/10807/179858
UR - http://dx.doi.org/10.1177/0148558x14534260
U2 - 10.1177/0148558X14534260
DO - 10.1177/0148558X14534260
M3 - Article
SN - 0148-558X
VL - 29
SP - 278
EP - 305
JO - JOURNAL OF ACCOUNTING AUDITING & FINANCE
JF - JOURNAL OF ACCOUNTING AUDITING & FINANCE
ER -