IFRS and Accounting Quality: Evidence from China’s Listed Companies
Date Issued
2010
Date
2010
Author(s)
Chen, Chien-Wei
Abstract
The purpose of this research is to investigate whether the application of IFRS is associated with higher accounting quality. The investigation involves a sample of companies from People’s Republic of China (PRC) which are listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange. Due to the characteristics of China investment environment, we divide the sample into 3 groups, which is A shares, B shares, and both A and B shares, respectively. The method employed in Barth, Landsman, and Lang (2007) is mainly taken in this research. The empirical results are shown below:
We find out that A shares which adopt IFRS exhibit the higher accounting quality through 3 of 5 measures we test than those adopting PRC GAAP. However, B shares perform less improvement in accounting quality through 4 of 5 measures we test. We infer that because of the discrepancy between IFRS and PRC GAAP, when A shares have changed to adopt the superior accounting standards, they exhibit the bigger improvement in accounting quality. However, the companies issuing B shares should provide two types of financial statements which one of them adopts PRC GAAP, and the other is in accordance with IFRS at the same time since 1993. They have tended to take a consistent point of view to prepare two types of financial statements in order to prevent big differences shown to the users. Therefore, the improvement is not clear.
Subjects
IFRS
accounting quality
earnings management
earnings smoothing
timely loss recognition
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