Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption
Using the mandatory adoption of International Financial Reporting Standards (IFRS) as an exogenous improvement to mandatory financial reporting, we document evidence supporting a complementary effect between mandatory and voluntary disclosures. We find that firms in countries that adopted IFRS in 20...
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sg-smu-ink.soa_research-21622016-02-24T10:10:52Z Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption Karthik, Balakrishnan LI, Xi YANG, Holly Using the mandatory adoption of International Financial Reporting Standards (IFRS) as an exogenous improvement to mandatory financial reporting, we document evidence supporting a complementary effect between mandatory and voluntary disclosures. We find that firms in countries that adopted IFRS in 2005 experience an increase in both the likelihood and frequency of management earnings forecasts relative to firms in countries that did not mandate IFRS. We also find that the increase in management forecasts is higher in countries where prior local GAAP are more different from IFRS or legal enforcement is stronger. Consistent with the confirmatory role of mandatory reporting, we also find that the increase in management forecasts following IFRS adoption is significantly mitigated for firms in financial industries, whose financial statements are less verifiable due to fair value estimates. Last, we find that the liquidity effect of IFRS is much larger when firms issue more management forecasts, suggesting that voluntary disclosure is an indirect mechanism through which IFRS brings benefits to capital markets. 2012-09-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1163 https://ink.library.smu.edu.sg/context/soa_research/article/2162/viewcontent/BLY_September_2012.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Mandatory disclosure Voluntary disclosure Management forecasts Liquidity Fair value accounting Accounting |
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Mandatory disclosure Voluntary disclosure Management forecasts Liquidity Fair value accounting Accounting Karthik, Balakrishnan LI, Xi YANG, Holly Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
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Using the mandatory adoption of International Financial Reporting Standards (IFRS) as an exogenous improvement to mandatory financial reporting, we document evidence supporting a complementary effect between mandatory and voluntary disclosures. We find that firms in countries that adopted IFRS in 2005 experience an increase in both the likelihood and frequency of management earnings forecasts relative to firms in countries that did not mandate IFRS. We also find that the increase in management forecasts is higher in countries where prior local GAAP are more different from IFRS or legal enforcement is stronger. Consistent with the confirmatory role of mandatory reporting, we also find that the increase in management forecasts following IFRS adoption is significantly mitigated for firms in financial industries, whose financial statements are less verifiable due to fair value estimates. Last, we find that the liquidity effect of IFRS is much larger when firms issue more management forecasts, suggesting that voluntary disclosure is an indirect mechanism through which IFRS brings benefits to capital markets. |
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Karthik, Balakrishnan LI, Xi YANG, Holly |
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Karthik, Balakrishnan LI, Xi YANG, Holly |
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Karthik, Balakrishnan |
title |
Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
title_short |
Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
title_full |
Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
title_fullStr |
Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
title_full_unstemmed |
Mandatory Financial Reporting Environment and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption |
title_sort |
mandatory financial reporting environment and voluntary disclosure: evidence from mandatory ifrs adoption |
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Institutional Knowledge at Singapore Management University |
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2012 |
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https://ink.library.smu.edu.sg/soa_research/1163 https://ink.library.smu.edu.sg/context/soa_research/article/2162/viewcontent/BLY_September_2012.pdf |
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