The IFRS Adoption's Effect on Accounting Quality in Sweden

Abstract

I examine whether the quality of financial reporting has increased in Sweden after the adoption of IFRS in 2005. My results suggest that there has been no increase in financial reporting quality over the two first years after the adoption. On the contrary, I find some indications of a decrease in financial reporting quality measured as smoothing of earnings, timely loss recognition, and value relevance. Moreover, In order to establish whether the unexpected results were driven by less committed or less skilled adopters of IFRS, I also replicate the analysis using only committed adopters. Interestingly enough, the results from this analysis suggest stronger evidence that the quality of financial reporting has decreased after the adoption of IFRS in Sweden.

Keywords: international accounting, earnings smoothing, timeliness, value relevance, accounting quality, IFRS in Europe

JEL Classification: G18, M41