Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*
© CAAA This study adopts a two-step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first ste...
| Main Authors: | , , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2021
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| Online Access: | https://hdl.handle.net/1721.1/135575 |
| _version_ | 1826214709271986176 |
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| author | Li, Bin Siciliano, Gianfranco Venkatachalam, Mohan Naranjo, Patricia Verdi, Rodrigo S |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Li, Bin Siciliano, Gianfranco Venkatachalam, Mohan Naranjo, Patricia Verdi, Rodrigo S |
| author_sort | Li, Bin |
| collection | MIT |
| description | © CAAA This study adopts a two-step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS-adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long-term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost-benefit trade-offs when considering disclosure changes in the future. |
| first_indexed | 2024-09-23T16:10:14Z |
| format | Article |
| id | mit-1721.1/135575 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T16:10:14Z |
| publishDate | 2021 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1355752023-12-19T21:16:56Z Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* Li, Bin Siciliano, Gianfranco Venkatachalam, Mohan Naranjo, Patricia Verdi, Rodrigo S Sloan School of Management © CAAA This study adopts a two-step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS-adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long-term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost-benefit trade-offs when considering disclosure changes in the future. 2021-10-27T20:24:05Z 2021-10-27T20:24:05Z 2021 2021-03-30T18:54:42Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/135575 en 10.1111/1911-3846.12638 Contemporary Accounting Research Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley SSRN |
| spellingShingle | Li, Bin Siciliano, Gianfranco Venkatachalam, Mohan Naranjo, Patricia Verdi, Rodrigo S Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title | Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title_full | Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title_fullStr | Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title_full_unstemmed | Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title_short | Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality* |
| title_sort | economic consequences of ifrs adoption the role of changes in disclosure quality |
| url | https://hdl.handle.net/1721.1/135575 |
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