Harmonization of Accounting Practices Among IAS Firms Listed in the U.S. and Its Capital Market Implications

The focus of the study is on financial reporting for non-U.S. firms registered with the Securities Exchange Commission (SEC) but using International Accounting Standards (IAS). This study addresses two issues, (1) whether the comparability of financial reporting among firms using IAS in credit and equity financing jurisdictions increases over time and (2) the associated capital market implications. The motivation for the study is the SEC's ongoing assessment of IAS for possible use by non-U.S. registrants for listing and capital raising in the U.S. Previous research on variations in financial reporting practices has revealed distinctly different types of financial reporting depending on country of origin. Moreover, some research suggests that such differences in financial reporting tend to persist in spite of harmonization efforts of accounting standards. This study suggests that there may be a systematic difference between credit and equity firms' financial reporting that is manifested by the fact that credit firms' adjustments to U.S. GAAP are greater than the adjustments made by equity firms. This systematic difference has had the following capital market consequences for credit firms, (1) a decreasing strength of association between accounting earnings and share prices post-1994, (2) an increased bid-ask spread post-1994, and (3) a decreased trading volume post-1994. This may be an indication that on the average firms reporting under IAS fail to meet an important part of the SEC's second assessment criterion with respect to high quality and full disclosure, namely comparability. In addition, it seems that the revisions made by International Accounting Standards Board (IASB) have not resulted in more congruent financial reporting among firms reporting under IAS over time.

Grantor dc:publisher

University of North Texas

Year dc:date

2003

Author dc:creator

• Paananen, Mari

Contributors dc:contributor

• Coe, Teddy L.
• Tieslau, Margie A.
• Raman, K. K.

• Corporations -- Accounting.
• Accounting -- Standards.
• International accounting standard.
• comparability
• harmonization
• IAS
• U.S. capital market
• accounting practices

Statement dc:rights

• Public
• Copyright
• Paananen, Mari
• Copyright is held by the author, unless otherwise noted. All rights reserved.

Language dc:language

English

Identifier

oclc: 54356975
https://digital.library.unt.edu/ark:/67531/metadc4400/
ark: ark:/67531/metadc4400

OAI identifier oai:identifier

info:ark/67531/metadc4400