This study evaluates the impact of the 2005 mandatory adoption of IFRS in the European Union on the value relevance of financial statements using a sample of 1,735 firms from nine countries where early adoption of IFRS was not allowed. We test Local GAAP and IFRS same firm year observations and find earnings reconciliations from Local GAAP to IFRS to be value relevant. By contrast, the IFRS equity reconciliations do not appear to add any incremental information for investors. Our results also indicate the benefits from the transition to IFRS are limited to small firms, with low international sales, high concentration of ownership and low exposure to foreign investors (Local Firms). The impact of the transition on Local Firms is higher in countries with weaker institutions.
CAPKUN, V., JENY, A., JEANJEAN, T. and WEISS, L.A. (2010). Value Relevance of IFRS Reconciliations: The Role of Incentives and Institutions. In: Proceedings of the 33rd Annual Congress of EAA (Site internet). European Accounting Association (EAA).