Externalities of Mandatory IFRS Adoption: Evidence from Cross-Border Spillover Effects of Financial Information on Investment Efficiency

2012 ◽  
Vol 88 (3) ◽  
pp. 881-914 ◽  
Author(s):  
Chen Chen ◽  
Danqing Young ◽  
Zili Zhuang
Keyword(s):  
Spillover Effect ◽  
Spillover Effects ◽  
Data Availability ◽  
Investment Efficiency ◽  
Investment Performance ◽  
Ifrs Adoption ◽  
Cross Border ◽  
Legal Enforcement ◽  
Positive Externalities ◽  
Industry Competition

ABSTRACT This study examines the externalities of mandatory IFRS adoption on firms' investment efficiency in 17 European countries. We use the ROA difference between the firm and its peers to proxy for the information on the peers' investment performance. We find that the spillover effect of a firm's ROA difference versus its foreign peers, but not domestic peers, on the firm's investment efficiency increases after IFRS adoption. We also find that increased disclosure by both foreign and domestic peers after IFRS adoption has a spillover effect on a firm's investment efficiency. Further, a firm's investment changes induced by its ROA difference versus foreign peers are more value-relevant after IFRS adoption, and those induced by increased disclosure by foreign peers under IFRS are value-relevant. Additional analyses reveal that our results are affected by legal enforcement strength, peer composition, and industry competition. Overall, we document positive externalities of mandatory IFRS adoption. Data Availability: Data are available from commercial providers (Worldscope, DataStream, and I/B/E/S).

Auditors and Client Investment Efficiency

2016 ◽  
Vol 92 (2) ◽  
pp. 19-40 ◽  
Author(s):  
Gil Soo Bae ◽  
Seung Uk Choi ◽  
Dan S. Dhaliwal ◽  
Phillip T. Lamoreaux
Keyword(s):  
Financial Reporting ◽  
Capital Investment ◽  
Reporting Quality ◽  
Information Environment ◽  
Data Availability ◽  
Financial Reporting Quality ◽  
Investment Behavior ◽  
Investment Efficiency ◽  
Management Information ◽  
Industry Competition

ABSTRACT This study examines the relation between auditors and their clients' investment efficiency. We hypothesize and find that auditor characteristics that proxy for an auditor's knowledge and resources are associated with higher client investment efficiency, after controlling for the auditor's effect on financial reporting quality. This result is consistent with auditors providing informational advantages to their clients in a generalized investment setting. We find that this auditor effect is more pronounced for clients who have a higher demand for information as measured by client size, industry competition, and client complexity. The effect is also more pronounced for clients of longer-tenured auditors. Overall, the results suggest that auditors may be one component to the management information environment and, as such, appear to influence capital investment behavior. JEL Classifications: M4; M42. Data Availability: All data are publicly available.

Do International Rulings have Spillover Effects?

2016 ◽  
Vol 68 (4) ◽  
pp. 713-751 ◽  
Author(s):  
Jeffrey Kucik ◽  
Krzysztof J. Pelc
Keyword(s):  
Financial Markets ◽  
International Law ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Publicly Traded ◽  
International Courts ◽  
Cross Border ◽  
Novel Approach ◽  
The World ◽  
Formal Authority

How influential are international courts? Can their rulings reach beyond a given case and affect the behavior of countries not party to the dispute? International law is clear on the matter: rulings have no formal authority beyond the case at hand. This tenet is consistent with the incentives of sovereign states wary of delegating too much authority to courts. By contrast, the authors claim that even in the absence of formal authority, the rulings of international courts can affect behavior by mobilizing pro-compliance groups in countries not party to a dispute. They test these beliefs in the context of the World Trade Organization (WTO) through a novel approach. Because WTO rulings have implications for the fortunes of publicly traded firms, they examine whether financial markets bet on there being spillover effects beyond the case at hand. They rely on two quantitative case studies to test for a cross-border and a cross-industry spillover effect: can rulings have effects in countries and on industries other than those at issue in the initial dispute? The results suggest that the answer is a tentative yes. The spillover effects of international rulings may be a matter of scholarly contention, but their existence is something that financial markets appear willing to bet on.

scholarly journals Eco-Packaging and its Market Performance: UPC-level Sales, Brand Spillover Effects, and Curvilinearity

2020 ◽  
Vol 12 (21) ◽  
pp. 9061
Author(s):  
Sunhee Choi ◽  
Sangno Lee
Keyword(s):  
Spillover Effect ◽  
Revealed Preference ◽  
Product Category ◽  
Positive Association ◽  
Spillover Effects ◽  
Behavioral Pattern ◽  
Data Availability ◽  
Product Categories ◽  
Product Sales ◽  
Scanner Panel

The prior research has partially addressed the full impacts of eco-packaging, mainly focusing on intention or attitude in a limited context. We attempt to investigate the actual consumer behavioral pattern to the eco-packaging appeals with revealed preference data. To test the diverse impacts on various product hierarchies, the sales of frequently purchased product category was applied. The scanner panel data availability in multi-category products enables us to test (1) the eco-packaging appeal impacts on Universal Product Code level sales, (2) the eco-packaging impacts on brand spillover effect, and (3) the linear or non-linear relationship between eco-packaging appeal and sales. Our results show that eco-packaging does contribute to its individual product sales. With regard to the brand spillover effect, our results reveal rather interesting results: brand spillover effect is present when eco-packaging intensity is high in the own product category, but not when the intensity is high in other product categories even if they both carry the same umbrella brand. Lastly, we discover an inverted U-shaped relationship between eco-packaging intensity within a brand and brand-level sales. It implies that adding eco-packaging appeal to products would actually increase the whole brand sales immediately, but after a peak point, the positive association transfer is weakened. Our results highlight that it is necessary to consider that ecologically sound packaging does induce market success.

Does Mandatory Adoption of International Financial Reporting Standards Decrease the Voting Premium for Dual-Class Shares?

2013 ◽  
Vol 88 (4) ◽  
pp. 1289-1325 ◽  
Author(s):  
Hyun A. Hong
Keyword(s):  
Financial Reporting ◽  
Data Availability ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Minority Shareholders ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Legal Enforcement ◽  
Voting Premium ◽  
Dual Class

ABSTRACT I examine whether voting premiums are reduced following mandatory International Financial Reporting Standards (IFRS) adoption for firms that have a dual-class share structure. I find that mandatory adopters' voting premiums decrease, on average, by 8 percent subsequent to mandatory IFRS adoption. This effect is statistically significant relative to the corresponding effect for non-IFRS adopters. Further, I find that this effect is more pronounced in countries with strong legal enforcement and for mandatory adopters that experience an increase in the transparency and comparability of reported information under the new accounting regime. Taken together, these results support the view that mandatory IFRS adoption benefits minority shareholders by providing an effective mechanism to constrain the private benefits of control. However, one should interpret these results with caution as concurrent efforts to strengthen corporate governance regimes and the enforcement of corporate and securities laws may also contribute to the decrease in voting premiums documented in this paper. Data Availability: Data used in this study are available from the sources listed in the text.

Does the Mandatory Adoption of IFRS Improve the Association between Accruals and Cash Flows? Evidence from Accounting Estimates

2018 ◽  
Vol 33 (1) ◽  
pp. 39-59
Author(s):  
Jimmy F. Downes ◽  
Tony Kang ◽  
Sohyung Kim ◽  
Cheol Lee
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
Data Availability ◽  
The European Union ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Accounting Estimates ◽  
Accounting Accruals ◽  
Future Cash Flows

SYNOPSIS We investigate the effect of mandatory International Financial Reporting Standards (IFRS) adoption in the European Union on the association between accounting estimates and future cash flows, a key concept of accounting quality within the International Accounting Standard Board conceptual framework. We find that the predictive value of accounting estimates improves after IFRS adoption. This improvement is largely driven by specific types of accounting estimates, such as accounts receivable, depreciation, and amortization expense. We also find that the improvement is concentrated in countries with larger differences between pre-IFRS domestic GAAP and IFRS. Our findings suggest that IFRS allow managers to exercise their judgment to provide information about future cash flows through the more subjective/judgmental portion of accounting accruals. JEL Classifications: M16; M49; O52. Data Availability: The data used in this study are from public sources identified in the study.

Did the 2005 Deferred Prosecution Agreement Adversely Impact KPMG's Audit Practice?

2018 ◽  
Vol 38 (1) ◽  
pp. 77-102 ◽  
Author(s):  
Matthew Baugh ◽  
Jeff P. Boone ◽  
Inder K. Khurana ◽  
K. K. Raman
Keyword(s):  
Service Provider ◽  
Audit Quality ◽  
Spillover Effect ◽  
Audit Fees ◽  
Data Availability ◽  
Department Of Justice ◽  
Big 4 ◽  
Tax Shelters

SUMMARY We examine the consequences of misconduct in a Big 4 firm's nonaudit practice for its audit practice. Specifically, we examine whether KPMG's audit practice suffered a loss of audit fees and clients and/or a decline in factual audit quality following the 2005 deferred prosecution agreement (DPA) with the Department of Justice for marketing questionable tax shelters. We find little evidence that the DPA adversely impacted KPMG's audit practice by way of either audit fees or the likelihood of client gains/losses, suggesting little or no harm to KPMG's audit reputation. We also find that the DPA had no effect on the firm's factual audit quality, even for those audit clients that dropped KPMG as their tax service provider. Collectively, our findings suggest that there was no spillover effect from the DPA to KPMG's audit practice. Data Availability: All data are publicly available.

Effects of tourism development on economic growth: An empirical study of China based on both static and dynamic spatial Durbin models

2021 ◽  
pp. 135481662110211
Author(s):  
Honghong Liu ◽  
Ye Xiao ◽  
Bin Wang ◽  
Dianting Wu
Keyword(s):  
Economic Growth ◽  
Spillover Effect ◽  
Tourism Development ◽  
Spillover Effects ◽  
Policy Implications ◽  
Long Term Effects ◽  
Spatial Spillover ◽  
Domestic Tourism ◽  
Inbound Tourism ◽  
Spatial Spillover Effect

This study applies the dynamic spatial Durbin model (SDM) to explore the direct and spillover effects of tourism development on economic growth from the perspective of domestic and inbound tourism. The results are compared with those from the static SDM. The results support the tourism-led-economic-growth hypothesis in China. Specifically, domestic tourism and inbound tourism play a significant role in stimulating local economic growth. However, the spatial spillover effect is limited to domestic tourism, and the spatial spillover effect of inbound tourism is not significant. Furthermore, the long-term effects are much greater than the short-term impact for both domestic and inbound tourism. Plausible explanations of these results are provided and policy implications are drawn.

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