Firm value and market liquidity around the adoption of common accounting standards

Pingyang Gao, Xu Jiang, Gaoqing Zhang

Research output: Contribution to journalArticle

Abstract

The adoption of common accounting standards generates both a precision effect and a network effect. When firms use common standards, investors can leverage their knowledge about the standards to process more financial reports. Embedding both effects into the economic framework of Baiman and Verrecchia (1995, 1996), we study the adoption's effects on reporting precision, firm value, and liquidity of both the switcher and the early adopter. The model helps address the identification challenge and reconcile some existing results in the empirical literature on IFRS adoption. It also generates implications for standardizing disclosure and accounting methods.

Original languageEnglish (US)
Article number101220
JournalJournal of Accounting and Economics
Volume68
Issue number1
DOIs
StatePublished - Aug 2019

    Fingerprint

Keywords

  • Firm value
  • Information processing
  • International Financial Reporting Standards (IFRS)
  • Liquidity
  • Network effect
  • Reporting quality

Cite this