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Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*

Publication ,  Journal Article
Li, B; Siciliano, G; Venkatachalam, M; Naranjo, P; Verdi, RS
Published in: Contemporary Accounting Research
March 1, 2021

This study adopts a two-step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS-adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long-term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost-benefit trade-offs when considering disclosure changes in the future.

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Published In

Contemporary Accounting Research

DOI

EISSN

1911-3846

ISSN

0823-9150

Publication Date

March 1, 2021

Volume

38

Issue

1

Start / End Page

129 / 179

Related Subject Headings

  • Accounting
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability
 

Citation

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Li, B., Siciliano, G., Venkatachalam, M., Naranjo, P., & Verdi, R. S. (2021). Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*. Contemporary Accounting Research, 38(1), 129–179. https://doi.org/10.1111/1911-3846.12638
Li, B., G. Siciliano, M. Venkatachalam, P. Naranjo, and R. S. Verdi. “Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*.” Contemporary Accounting Research 38, no. 1 (March 1, 2021): 129–79. https://doi.org/10.1111/1911-3846.12638.
Li B, Siciliano G, Venkatachalam M, Naranjo P, Verdi RS. Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*. Contemporary Accounting Research. 2021 Mar 1;38(1):129–79.
Li, B., et al. “Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*.” Contemporary Accounting Research, vol. 38, no. 1, Mar. 2021, pp. 129–79. Scopus, doi:10.1111/1911-3846.12638.
Li B, Siciliano G, Venkatachalam M, Naranjo P, Verdi RS. Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*. Contemporary Accounting Research. 2021 Mar 1;38(1):129–179.
Journal cover image

Published In

Contemporary Accounting Research

DOI

EISSN

1911-3846

ISSN

0823-9150

Publication Date

March 1, 2021

Volume

38

Issue

1

Start / End Page

129 / 179

Related Subject Headings

  • Accounting
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability