Mandatory IFRS Adoption and the U.S. Home Bias

2011 ◽  
Author(s):  
Inder K. Khurana ◽  
Paul N. Michas
Keyword(s):  
Home Bias ◽  
Ifrs Adoption ◽  
The U.S

Mandatory IFRS Adoption and the U.S. Home Bias

2011 ◽  
Vol 25 (4) ◽  
pp. 729-753 ◽  
Author(s):  
Inder K. Khurana ◽  
Paul N. Michas
Keyword(s):  
Fixed Effects ◽  
Home Bias ◽  
Accounting Standards ◽  
Data Availability ◽  
Portfolio Holdings ◽  
Ifrs Adoption ◽  
Stock Portfolios ◽  
Country Level ◽  
Key Factor ◽  
The U.S

SYNOPSIS This paper examines whether mandatory IFRS adoption at the country level lowers U.S. investors' propensity to overweight domestic stocks in their common stock portfolios (generally referred to as home bias). We find that, on average, U.S. home bias decreases for countries that mandate IFRS adoption, after controlling for country-fixed effects. We also find that the reduction in the U.S. home bias after the mandatory adoption of IFRS is greater for countries with larger differences between IFRS and their domestic accounting standards, for countries with a stricter rule of law and a common law legal origin, and in countries with greater incentives to report high-quality financial information. Overall, our results indicate that a common set of global accounting standards matters for portfolio holdings of U.S. investors and that U.S. investors regard the enforcement of standards to be a key factor in making investments outside the U.S. Data Availability: Data are publicly available.

Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis

2010 ◽  
Vol 24 (3) ◽  
pp. 355-394 ◽  
Author(s):  
Luzi Hail ◽  
Christian Leuz ◽  
Peter Wysocki
Keyword(s):  
United States ◽  
Cost Savings ◽  
Cost Benefit ◽  
The United States ◽  
Future Evolution ◽  
Reporting Practices ◽  
Market Effects ◽  
Ifrs Adoption ◽  
Transition Costs ◽  
The U.S

SYNOPSIS: This article is Part I of a two-part series analyzing the economic and policy factors related to the potential adoption of IFRS by the United States. In this part, we develop the conceptual framework for our analysis of potential costs and benefits from IFRS adoption in the United States. Drawing on the academic literature in accounting, finance, and economics, we assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We also discuss the compatibility of IFRS with the current U.S. regulatory and legal environment, as well as the possible macroeconomic effects of IFRS adoption. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit trade-off between (1) recurring, albeit modest, comparability benefits for investors; (2) recurring future cost savings that will largely accrue to multinational companies; and (3) one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. In Part II of the series (see Hail et al. 2010), we provide an analysis of the policy factors related to the decision and present several scenarios for the future evolution of U.S. accounting standards in light of the current global movement toward IFRS.

How Would the Mandatory Adoption of IFRS Affect the Earnings Quality of U.S. Firms? Evidence from Cross-Listed Firms in the U.S.

2011 ◽  
Vol 25 (4) ◽  
pp. 837-860 ◽  
Author(s):  
Jerry Sun ◽  
Steven F. Cahan ◽  
David Emanuel
Keyword(s):  
Earnings Quality ◽  
Discretionary Accruals ◽  
Earnings Persistence ◽  
Listed Firms ◽  
Ifrs Adoption ◽  
The Cross ◽  
The Impact ◽  
Timely Loss Recognition ◽  
The U.S

SYNOPSIS We examine the impact of IFRS adoption on the earnings quality of foreign firms cross-listed in the U.S. from countries that have already adopted IFRS on a mandatory basis. We use the cross-listed firms as surrogates for the U.S. firms so we can observe the effect of IFRS adoption in the U.S. We examine five measures of earnings quality related to discretionary accruals, target beating, earnings persistence, timely loss recognition, and the earnings response coefficient (ERC). To isolate the effect of IFRS adoption, we use a matched sample design where each cross-listed firm is matched to a U.S. firm. We find the difference in earnings quality from the pre- to post-IFRS period is not different for the cross-listed and matched firms when earnings quality is measured by absolute discretionary accruals, timely loss recognition, or a long-window ERC. However, for the incidence of small positive earnings and earnings persistence, we find significant difference-in-differences, indicating that IFRS adoption led to an improvement in earnings quality for cross-listed firms relative to the matched firms. Our results are slightly surprising since U.S. GAAP is generally viewed as high-quality standards with little room for improvement.

scholarly journals The effect of experts’ and laypeople’s forecasts on others’ stock market forecasts

2019 ◽  
Author(s):  
Christoph Huber ◽  
Juergen Huber ◽  
Laura Hueber
Keyword(s):  
General Population ◽  
Stock Market ◽  
Future Development ◽  
Large Scale ◽  
Home Bias ◽  
Forecast Errors ◽  
Online Experiment ◽  
Finance Industry ◽  
Two Indices ◽  
The U.S

With a large-scale online experiment with 1593 participants from the U.S. andthe U.K. we explore whether and how people working in the finance industry andlaypeople from the general population are influenced by information on other people’sforecasts when making forecasts on the future development of two indices andtwo stocks. We find that (i) laypeople’s forecasts are strongly influenced by informationthey get on other subjects’ forecasts, while financial professionals are much lessinfluenced by information signals; (ii) signals by financial professionals influence allsubject groups more than forecasts by laypeople; (iii) we observe a home bias in allsubject groups, which can be mitigated by information signals; (iv) all subject groupsexpect lower forecast errors for financial professionals than for laypeople, hence wefind evidence for trust in experts.

The Advent of IFRS in Canada: Incidence on Value Relevance

2016 ◽  
Vol 15 (3) ◽  
pp. 113-130 ◽  
Author(s):  
Denis Cormier ◽  
Michel L. Magnan
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Stock Markets ◽  
Value Relevance ◽  
Financial Statements ◽  
Market Prices ◽  
Listed Firms ◽  
Ifrs Adoption ◽  
The U.S

ABSTRACT The paper focuses on Canada's enactment of IFRS for publicly accountable firms. We investigate whether IFRS meet one of their stated goals, which is to improve financial statements' relevance for stock markets. Results show that migrating from Canadian GAAP to IFRS enhances the value relevance of earnings but the effect is concentrated among firms that are cross-listed in the U.S. (and that do not report according to U.S. GAAP). The advent of IFRS enhances the value relevance of information contained in footnotes but attenuates the need for non-GAAP measures' disclosure. Stock market prices also embed more precise anticipations about future IFRS earnings. Additional analyses suggest that less earnings management accompanies IFRS adoption. Our results suggest that, for cross-listed firms, the adoption of IFRS enhanced the comparability of their financial statements and, ultimately, their value relevance.

Liquidity and IFRS Adoption in Canada

2021 ◽  
Author(s):  
Shahid Ali Khan ◽  
Mark Anderson ◽  
Hussein A Warsame ◽  
Michael Wright
Keyword(s):  
Matched Sample ◽  
Sample Analysis ◽  
Disclosure Quality ◽  
Cross Sectional ◽  
Ifrs Adoption ◽  
Before And After ◽  
The U.S

We examine cross-sectional differences in changes in liquidity for Canadian firms between pre-IFRS and post-IFRS adoption based on their pre-IFRS disclosure quality. In a matched sample analysis, with U.S. firms acting as control firms, we find that liquidity improved after mandatory IFRS adoption for Canadian companies with high pre-IFRS disclosure quality but declined for Canadian companies with low pre-IFRS disclosure quality, in comparison to U.S. peers. We find similar results when we stratify the sample based on total assets - larger Canadian firms gained liquidity while smaller Canadian firms lost liquidity, relative to the U.S. control firms. Our results are sustained when we use firms listed in Canada that report under U.S. GAAP before and after IFRS adoption as control firms.

Investor Perceptions of Potential IFRS Adoption in the United States

2012 ◽  
Vol 88 (2) ◽  
pp. 577-609 ◽  
Author(s):  
Philip P. M. Joos ◽  
Edith Leung
Keyword(s):  
United States ◽  
Stock Market ◽  
Market Reaction ◽  
The United States ◽  
Data Availability ◽  
Current Debate ◽  
Litigation Risk ◽  
Ifrs Adoption ◽  
Stock Market Reaction ◽  
The U.S

ABSTRACT This paper examines the stock market reaction to 15 events relating to IFRS adoption in the United States. The goal is to assess whether investors perceive the switch to IFRS as beneficial or costly. Our findings suggest that investors' reaction to IFRS adoption is more positive in cases where IFRS is expected to lead to convergence benefits. Our results also indicate a less positive market reaction for firms with higher litigation risk, which is consistent with investors' concerns about greater discretion and less implementation guidance under IFRS for these firms. Overall, the findings are relevant to the current debate on IFRS adoption in the U.S. and highlight the importance of convergence to investors. Data Availability:  All data are publicly available from the sources indicated in the paper (see Appendices A and B).

scholarly journals Institutional Differences of Information Content On Voluntary Earnings Releases In The U.S. and Canada

1970 ◽  
Vol 32 (1) ◽  
pp. 41-54
Author(s):  
Ronald Stunda
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Earnings Forecasts ◽  
Financial Accounting ◽  
Ifrs Adoption ◽  
Earnings Releases ◽  
Institutional Differences ◽  
Regulation Fd ◽  
To Come ◽  
The U.S

Historically, Canadian laws have created a less litigious environment thanthose of the U.S. This changed in 1998 with the passage of the Securities LitigationUniform Standards Act (SLUSA), and in 2000 with the passage of Regulation FullDisclosure (Regulation FD). The intent of these acts were to not only encouragemore U.S. firms to release voluntary earnings forecasts, but to offer protection forsuch disclosures against lawsuits, similar to laws in Canada. In addition, with theadvent of International Financial Accounting Standards (IFRS), voluntary earningsreleases play a bigger role, in increased frequency and revision of forecasts. SinceCanada requires the use of IFRS in financial reporting, it serves as a good base ofcomparison of what may be to come in the U.S. These types of differences comprisewhat can be characterized as institutional differences.This study finds that Canadian managers tend to issue voluntary earningsforecasts more frequently across the board than their U.S. counterpart, even afterthe interdiction of SLUSA and Regulation FD in the U.S. In addition, the Canadianforecasts tend to be more precise than those offered by U.S. managers. On the surface,it appears that the SLUSA and Regulation FD have not completely achievedtheir goal of creating greater and more informative voluntary earnings disclosuresin the U.S., but in addition, IFRS adoption in Canada may have also led to the increasedfrequency and accuracy of earnings forecasts.

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