The Value Relevance of Accounting Income Reported by DAX‐30 German Companies

Jermakowicz, Eva K.; Prather-Kinsey, Jenice; Wulf, Inge

doi:10.1111/j.1467-646x.2007.01011.x

Cited by 124 publications

(84 citation statements)

References 54 publications

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“…Several authors have confirmed the improvement of the explanatory power of the accounting numbers following the IFRS adoption (Bartov et al, 2005;Jermakowicz et al, 2007;Barth et al, 2008;Iatridis, 2010;Landsman et al, 2012;and Salemah, 2013). This result was attributed to the existence of additional information under IFRS.…”

Section: Ifrs and Earning Information Qualitymentioning

confidence: 92%

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

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The purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. AbstractThe purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. JEL Classification: M40, G34

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Section: Ifrs and Earning Information Qualitymentioning

confidence: 92%

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

View full text Add to dashboard Cite

show abstract

“…The results found by researchers studying the impact of IFRS on the financial information quality are not similar. Several authors have confirmed the improvement of the explanatory power of the accounting numbers following the adoption of IFRS (Bartov et al 2005, Jermakowicz et al 2007, and Barth et al 2008). By conducting a comparative study between companies that have been mandatory adopted the IFRS and those that maintain local standards, (Landsman et al 2012), show that the information content of annual earning's increases after the mandatory adoption of IFRS.…”

Section: Ifrs and Earning Information Qualitymentioning

confidence: 83%

The effect of the level of indebtedness on the earnings information content stemming from the mandatory IFRS adoption

Turki

Wali²,

Boujelbène³

2016

IJAES

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This paper examines the impact of IFRS / IAS (International Financial Reporting Standards / International Accounting Standards) mandatory adoption on the earning's information content apprehended by the level of information asymmetry and whether this impact differs from one company to another with regard to its level of indebtedness. The information asymmetry is measured by the properties of financial analysts' forecasts (error and dispersion).This study is conducted over 11 years from 2002 to 2012 by taking as a sample all the companies that belong to the CAC all tradable indexes. The results show a significant effect of these international's standards on financial analysts' forecasts, which stress informational content improvement. In addition, high level of indebtedness associated with IFRS adoption reduces forecast dispersion. By contrast, low level of indebtedness associated with IFRS adoption reduces forecast error.

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“…However, the Gründerzeit was interrupted in 1873 (Spoerer, 1998); corporate scandals caused by dramatic overvaluations, the Vienna stock market crash, the end of French reparation payments and the subsequent recession represented the economic environment in which a crucial characteristic of German accounting evolved: The state regulation of accounting which emphasized "prudent" asset valuation and liability recognition to avoid further economic fragility (Kinder et al, 2008;Gallhofer and Haslam, 1991;Spoerer, 1998;Hung and Subramanyam, 2007). This characteristic of German accounting implied that financial statements in accordance with the HGB did not prioritize a portrayal of a company's profitability that fosters economic decision-making Jermakowicz et al, 2007). Instead, German accounting rules intended to protect creditors, taking into account that banks were the primary source of funding for German firms and creditors thus represented a major group of stakeholders (Spoerer, 1998;Van Tendeloo and Vanstraelen, 2005;Glaum and Mandler, 1997;Black and White, 2003).…”

Section: Economic Background To Legislation In the Late 19 Th Centurymentioning

confidence: 99%

Separation – integration – and now …? A historical perspective on the relationship between German management accounting and financial accounting

et al. 2016

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German accounting has traditionally followed a dual ledger approach with strictly separated internal cost accounting, as the basis for management information, and external financial accounting focusing on creditor protection and based on the commercial law. However, the increased adoption of integrated accounting systems implies a significant change in the relationship between financial and management accounting systems. We use Hegelian dialectic to trace the historical development of German accounting from separated systems and antithetical propositions of full integration, to the emergence of partial integration as the synthesis of this transformation process. The foundation of our paper is a comprehensive analysis of the literature on the relationship between financial and management accounting in Germany. On this basis, we elaborate how financial accounting in Germany has been shaped by its economic context and legislation, and how financial accounting – accompanied by institutional pressures – in turn influenced management accounting. We argue that the changing relationship between management and financial accounting in the German context illustrates how current accounting practice is shaped not only by its environment, but also by its historical path. Based on this reasoning, we discuss several avenues for future research.

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The Value Relevance of Accounting Income Reported by DAX‐30 German Companies

Cited by 124 publications

References 54 publications

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

The effect of the level of indebtedness on the earnings information content stemming from the mandatory IFRS adoption

Separation – integration – and now …? A historical perspective on the relationship between German management accounting and financial accounting

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