Does Mandatory IFRS Adoption Improve Information Quality in Low Investor Protection Countries?

Journal of International Accounting, Auditing & Taxation, 2014, 23 (1):87-97

34 Pages Posted: 26 Feb 2013 Last revised: 1 May 2017

See all articles by Noor Houqe

Noor Houqe

School of Accountancy

Samuel Easton

Victoria University of Wellington - Te Herenga Waka

Tony van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration

Date Written: January 3, 2013

Abstract

We empirically examine the effect of IFRS adoption on the information quality of financial reporting in low investor protection countries. We examine the capital markets of France, Switzerland and Sweden, three Western European civil law countries, which are regarded as low investor protection, owing primarily to their respective systems of law according to the World Economic Forum’s 2011/2012 Global Competitiveness Report. By utilising and analysing data from 2003 and 2011, we find a significant improvement in both forecast accuracy and forecast dispersion following the mandatory adoption of IFRS in all three of the countries sampled, confirming our hypotheses. These results are robust to an increase in sample size as well as the removal of financial companies from the primary sample. These results suggest that the mandatory adoption of IFRS in low investor protection countries will lead to an improvement in information quality and international comparability.

Keywords: IFRS adoption, mandatory IFRS adoption, investor protection, corporate governance, information quality, forecast accuracy, forecast dispersion

JEL Classification: G14, G30, K22, M41

Suggested Citation

Houqe, Muhammad Nurul and Easton, Samuel and van Zijl, Tony, Does Mandatory IFRS Adoption Improve Information Quality in Low Investor Protection Countries? (January 3, 2013). Journal of International Accounting, Auditing & Taxation, 2014, 23 (1):87-97 , Available at SSRN: https://ssrn.com/abstract=2224278 or http://dx.doi.org/10.2139/ssrn.2224278

Muhammad Nurul Houqe (Contact Author)

School of Accountancy ( email )

New Zealand

Samuel Easton

Victoria University of Wellington - Te Herenga Waka

P.O. Box 600
Wellington, 6140
New Zealand

Tony Van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

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