تأثیر مشوق های گزارش دهی و استانداردهای حسابداری بر افزایش کیفیت سود

We investigate the different effects on earnings quality of accounting standards and reporting incentives for Germany over the period 1994 to 2005. To this end, we control for reporting incentives at the firm level, instead of the country level, by using the timing of voluntary IFRS adoption as a proxy for reporting incentives. We then include reporting incentives in an analysis of earnings management and information asymmetry. Contrary to common expectation, we find that IFRS reporting potentially decreases earnings quality on average; but also that reporting incentives appear to have lower effects on earnings quality in IFRS statements than in GGAAP statements. Thus, IFRS may lead to more homogenous earnings quality across firms.

Much attention in current accounting research is given to the effect of accounting standards on earnings quality. However, earnings quality is not likely to be determined by accounting standards alone, because accounting standards cannot address the level of detail that is required in business, they lag innovations in practice, and their implementation generally requires judgment (e. g., Ball et al., 2000 and Burgstahler et al., 2006). Consequently, even within the same accounting environment, similar companies can use discretionary items to report financial earnings of significantly different quality to the public. We address this issue in the setting of the German capital market, where the International Financial Reporting Standards (IFRS) have largely replaced the German Generally Accepted Accounting Principles (GGAAP) over the last decade.2 Specifically, we ask whether the results of extant earnings quality studies on the German capital market (e.g., Gassen and Sellhorn, 2006, Leuz, 2003, Leuz and Verrecchia, 2000 and van Tendeloo and Vanstraelen, 2005) – where reporting incentives are not controlled for – are comparable to the results that are obtained when reporting incentives are introduced to the model. We thereby focus on earnings management and information asymmetry, which arguably are the two most important earnings quality characteristics. Germany provides a valuable “natural experiment” for research in the area of reporting incentives. Starting in 1998 the German commercial code allowed listed companies to choose which internationally accepted accounting standards to use in preparing their consolidated financial statements. This resulted in the unique situation where different accounting standards, particularly IFRS and GGAAP, coexisted in Germany's capital market in the late 1990s and the beginning of the new millennium (e. g., Leuz, 2003). German companies were therefore given a considerable period of time in which they could voluntarily comply with IFRS in preparing their consolidated financial statements. Considering the different origins of IFRS and GGAAP, the decision to switch to IFRS signals that management is incentivized to comply with shareholder-orientated, fair value-based accounting rules, instead of the creditor-oriented accounting rules of GGAAP. Given the particular historical development of the German accounting environment as a whole, a firm's costs of this signal depend on the point in time at which IFRS was first adopted. Our research thus builds on the assumption that the timing of IFRS adoption can be used as a proxy for a company's reporting incentives. In our analysis, we observe that IFRS on average either has no significant effect on earnings quality or even decreases earnings quality relative to GGAAP. Moreover, we find that reporting incentives have an effect on earnings quality in both GGAAP and IFRS. Most importantly, we show that earnings quality in IFRS reporting is less affected by reporting incentives than in GGAAP and thus that IFRS might lead to a more homogenous earnings quality across firms. We extend prior research in three ways. First, we contribute to the discussion about how reporting incentives influence on earnings quality. Prior research shows that institutional differences across countries influence reporting quality. However, in contrast to the majority of prior studies, we use a sample of firms that are subject to the exact same institutional framework and legislation. We therefore are able to investigate at the firm level whether reporting incentives influence earnings quality. Second, we provide theoretical discussion and empirical evidence that the timing of the adoption of new accounting standards can in fact be used to proxy for differences in reporting incentives, which presumably in turn lead to differences in earnings quality. Since IFRS adoption was optional in many European Union (EU) member states for more than a decade, the approach introduced below enables researchers in other EU member states to include reporting incentives in their earnings quality analyses as well. Third, we utilize the given setting to show the effect of reporting incentives on two selected measures of earnings quality in Germany and to compare these to the effect that derives from accounting standards alone. We thereby focus on the two most important earnings quality measures, namely earnings management and information asymmetry. In sum, we contribute to the ongoing discussions about the effects of accounting standards and reporting incentives on earnings quality

In this paper we investigate how reporting incentives and accounting standards affect earnings quality. To do so we use the setting of the German capital market between 1994 and 2005, which allows us to compare companies with different accounting standards, but in the exact same market setting. Using an approach that allows for investigation of reporting incentives based on timing of IFRS adoption, we distinguish among three groups of self-selectors, namely, voluntary adopters, early compliers, and late followers. We find that IFRS on average, contrary to theoretical expectations, either has no significant effect on or even decreases earnings quality, compared to the level of earnings quality in the respective firms' GGAAP statements. Even though this result is contrary to common expectation, it is consistently found in previous empirical research on the German capital market as well. We moreover find that differences in earnings quality based on reporting incentives exist in both GGAAP and IFRS. More importantly however, we find in our data that earnings quality in IFRS statements appears less affected by reporting incentives than in GGAAP statements, and thus that IFRS might lead to a more homogenous level of earnings quality across firms. Finally, our results indicate that timing of IFRS adoption may in fact be used by researchers as a proxy for the reporting incentives of a company, as empirical results appear sensible in consideration of the historic evolution of the German accounting environment. Given the importance of reporting incentives, further research is necessary. Future analyses on the effects of reporting incentives on earnings quality should focus on three main issues. First, it would be interesting to conduct comparative analyses of earnings quality between EU countries in which IFRS adoption was optional prior to 2005 and countries that made IFRS mandatory earlier than 2005. Such an analysis could indicate the generalizability of using the timing of (voluntary) IFRS adoption as a proxy for reporting incentives. Second, our research merely considers GGAAP relative to IFRS. It may therefore also be valuable to investigate respective effects when companies reported in a different (European) local GAAP prior to IFRS adoption. Finally, it is necessary to identify the determinants that influence the incentives of a company to report high quality earnings to its stakeholders. Such determinants would be key to ultimately advising regulators about how to create an environment in which companies provide the best possible information to the public. As we have shown, only by considering the effects of both accounting standards and reporting incentives on all economic agents can regulators thrive to design an effective and efficient set of (accounting) rules.