IFRS adoption and investor perceptions of earnings quality: evidence from Korea
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Author(s)Heejeong ShinLink to ORCID Index: https://orcid.org/0000-0003-0950-8591
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Su-In KimLink to ORCID Index: https://orcid.org/0000-0002-7168-0619
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Sangmi KimLink to ORCID Index: https://orcid.org/0000-0001-8326-7226
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DOIhttp://dx.doi.org/10.21511/imfi.15(1).2018.04
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Article InfoVolume 15 2018, Issue #1, pp. 26-34
- 1315 Views
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197 Downloads
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Creative Commons Attribution-NonCommercial 4.0 International License
This study examines the consequences of International Financial Reporting Standards (IFRS) adoption in terms of the investor perception of earnings quality in the Korean stock market. Building on evidence from Ecker et al. (2006) suggesting that return-based earnings quality (E-loading), as captured by the sensitivity of stock returns to accounting information risk, accurately represents investor perceptions of earnings information risk, the authors examine whether E-loading is different between the pre- and post-IFRS adoption periods. Using KSE-listed firms from 2006 to 2014, the authors find the evidence that the extent of stock return sensitivity to information risk embedded in financial statements is greater in the period of post-IFRS adoption than in the period of pre-IFRS adoption. This finding indicates that even though accounting-based earnings quality improves after the adoption of IFRS, investors perceive earnings information after the adoption of IFRS as riskier than before. In addition, the difference in investor perception is more pronounced for firms with low accruals quality as captured by discretionary accruals, indicating that the effect of IFRS adoption on return-based earnings quality is distinctive from that on accounting-based earnings quality. The paper contributes to the literature on IFRS by exploring the effect of IFRS adoption through a new perspective on earnings quality in capital market.
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JEL Classification (Paper profile tab)G140
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References20
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Tables6
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Figures0
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- Table 1. Descriptive statistics
- Table 2. Correlation matrix
- Table 3. Regression results
- Table 4. Descriptive statistics: accruals quality
- Table 5. Regression analysis results
- Table 6. Regression analysis results
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What do we know about empirical joint audit research? A literature review
Patrick Velte 
doi: http://dx.doi.org/10.21511/afc.01(1).2017.01
Accounting and Financial Control Volume 1, 2017 Issue #1 pp. 4-14 Views: 1859 Downloads: 1229 TO CITEThis literature review evaluates empirical studies which concentrate on economic effects on joint audits from an international perspective. We briefly introduce the theoretical and empirical joint audit framework that comprises an adequate structure of the state-of-the-art of empirical research in this field. This is followed by a discussion of the following output factors of joint audits: (1) audit quality; (2) audit costs and (3) audit market concentration. We will summarize the key findings in each area, and provide a description of the analyzed proxies. Finally, we will discuss the current limitations of the studies and give useful recommendations for future empirical research activities in this topic.
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The effect of dividend payments and firm’s attributes on earnings quality: empirical evidence from Egypt
Gehan A. Mousa ,
Abdelmohsen Desoky
doi: http://dx.doi.org/10.21511/imfi.16(1).2019.02
Investment Management and Financial Innovations Volume 16, 2019 Issue #1 pp. 14-29 Views: 1819 Downloads: 162 TO CITE АНОТАЦІЯThis empirical study aims mainly to investigate the effect of both dividend payments (DP) and five firm's attributes (firm size, firm leverage, firm performance, legal form and audit quality) on earnings quality (EQ) of the most active listed firms in Egypt. A sample of 552 firm-year observations during four years from 2014 to 2017 was used. Hierarchical Multiple Regression (HMR) was used to regress the six independent variables on firms’ EQ through the absence of firms’ earnings management (EM), which was estimated through discretionary accruals (DAC). Main results show that there is some divergence in EM practices over the four years and might suggest that EM by listed firms in Egypt exists especially in the first two years (2014 and 2015); how¬ever, relatively lower EM practices are found in the last two years (2016 and 2017). Correlation results show a number of significant relationships between the EM and three independent variables (firm leverage, legal form and audit quality). HMR results are in line with the results obtained via Pearson correlation.
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The effects of the International Financial Reporting Standards (IFRS) adoption on earnings quality: evidence from Korea
Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 243-250 Views: 927 Downloads: 241 TO CITE АНОТАЦІЯThis study investigates whether earnings quality of Korean listed firms was substantially improved after the IFRS adoption in long-term aspect and which firms listed in KOSPI or KOSDAQ market had been more enjoyed the benefit. Prior studies related to this subject don’t provide consistent results and have a limitation of insufficiency of research periods. Therefore, this study analyzes the positive effect of the IFRS adoption in Korea using long-term based approach and comparative analysis on each Korean stock market. Furthermore, this study considered Korean specific institutional environment in which main financial statements prepared and disclosed by listed firms were changed from individual financial statements to consolidated financial statements after the IFRS adoption. Results of the study found that earnings quality of Korean listed firms had been significantly improved during 5 years after the IFRS adoption. In addition, earnings quality on consolidated financial statements of KOSDAQ listed firms has improved more than that of KOSPI listed firms. The results provide meaningful implications to evaluate the effects of IFRS adoption on earnings quality and to assess accomplishment of fundamental purpose of the IFRS adoption in Korea.
