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The impact of IFRS on accounting quality in a regulated market : an empirical study of China

journal contribution
posted on 06.12.2017, 00:00 by C Liu, Lee YaoLee Yao, N Hu, L Liu
As more countries consider the adoption of International Financial Reporting Standards (IFRS) that are based on practices prevalent in the English-speaking countries with free markets, it’s increasingly important to understand the impact of IFRS on countries of different institutional, economic, and political environments. This article reports a study that examines the impact of IFRS on accounting quality in a regulated market, China, where new substantially IFRS-convergent accounting standards became mandatory for listed firms in 2007. Accounting quality is examined for the period 2005 to 2008 with only firms mandated to follow the new standards. The empirical results generally indicate that accounting quality improved with decreased earnings management and increased value relevance of accounting measures in China since 2007. Firms audited by the Big Four are expected to have higher quality before the standard change evidenced quality improvement to a smaller extent. Further analysis shows that such changes are less likely to result from changes in economic conditions but from the changes of the standards. Through the analysis of China’s adoption of the new substantially IFRS-convergent standards, the study provides direct evidence on the question of whether IFRS can be relevant to markets that are still disciplined mainly by regulators rather than by market mechanisms.

Funding

Category 1 - Australian Competitive Grants (this includes ARC, NHMRC)

History

Volume

26

Issue

4

Start Page

659

End Page

676

Number of Pages

18

eISSN

2160-4061

ISSN

0148-558X

Location

United States

Publisher

Sage Publications

Language

en-aus

Peer Reviewed

Yes

Open Access

No

External Author Affiliations

Faculty of Arts, Business, Informatics and Education; TBA Research Institute; University of Winnipeg; University of Wisconsin;

Era Eligible

Yes

Journal

Journal of accounting, auditing and finance.