The Impact of IFRS Adoption on Earnings Quality: A Study Conducted on Foreign Issuers in the United States

  •  Priscilla Samantha den Besten    
  •  Georgios Georgakopoulos    
  •  Konstantinos Vasileiou    
  •  Nikolaos Ereiotis    


The worldwide adoption of International Financial Reporting Standards (IFRS) is affecting many countries around the globe as it has become widely spread. Since 2007 the United States (US) allows foreign issuers to voluntarily adopt IFRS. This paper investigates the effect of IFRS adoption on earnings quality after voluntary IFRS adoption was allowed to foreign issuers in the US. More precisely, the discretionary accruals and the small positive earnings are tested for a sample of foreign issuers in the US that are registered and reporting with the SEC, comparing a pre-period from 2002 to 2006 with a post-period from 2008 to 2011. The results from the difference-in-differences regression analysis suggest that in terms of discretionary accruals there is no statistical difference between the pre-IFRS and the post-IFRS period, therefore the earnings quality remains the same. For small positive earnings it is found that, when foreign issuers incorporate IFRS, these are lower, indicating higher earnings quality.

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