Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer

Clare Wang, University of Pennsylvania

Abstract

This dissertation investigates whether harmonization of accounting standards enhances the comparability of financial information across countries. In the first chapter, I statistically define and link comparability to firm value in a theoretical framework. Based on a two-firm, sequential information release setting, I show that a firm yet to announce earnings reacts more strongly to the earnings announcement of a foreign firm when both report under the same rather than different accounting standards. The second chapter provides associated empirical evidence. First, my analysis of abnormal price and volume reactions for a global sample of firms supports the theoretical prediction. Next, in an attempt to control for the underlying economic comparability and the effects of changes in reporting quality, I use a difference-in-differences design around the mandatory introduction of International Financial Reporting Standards (IFRS). I find that mandatory adopters experience a significant increase in market reactions to the release of earnings by voluntary adopters compared to pre-mandatory adoption. This increase is not observed for non-adopters over the same period. Taken together, this dissertation shows that accounting standards harmonization facilitates transnational information transfer, and suggests financial statement comparability as a direct mechanism. ^

Subject Area

Business Administration, Accounting

Recommended Citation

Clare Wang, "Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer" (January 1, 2011). Dissertations available from ProQuest. Paper AAI3475931.
http://repository.upenn.edu/dissertations/AAI3475931

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