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Lifting the veil of accounting information under different accounting standards: lessons learned from the German experiment

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  • Adamek, Carmen
  • Kaserer, Christoph

Abstract

It is well-known from US-related studies that investors systematically overreact to accrual-based accounting information. We address the question to what extent this accrual anomaly is related to different accounting standards. We provide empirical evidence that the accrual anomaly is also present in Germany. However, this anomaly has become particularly important after the year 2000 and cannot be detected for firms presenting their financial statements under German GAAP. It is argued that introducing true and fair view accounting, like IFRS, that relies on difficult-to-verify information, may not be suitable to improve accounting information quality in the context of a weak corporate governance system. --

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Bibliographic Info

Paper provided by Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München in its series CEFS Working Paper Series with number 2006-01.

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Date of creation: 2006
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Handle: RePEc:zbw:cefswp:200601

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Related research

Keywords: accrual anomaly; earnings persistency; conservative accounting; true and fair view accounting; accounting standards; accounting regulation; empirical accounting research; German GAAP; IFRS/IAS; US-GAAP;

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  1. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
  2. Paul Hribar, 2002. "Errors in Estimating Accruals: Implications for Empirical Research," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 105-134, 03.
  3. Elgers, Pieter T. & Lo, May H. & Pfeiffer, Ray Jr., 2003. "Analysts' vs. investors' weightings of accruals in forecasting annual earnings," Journal of Accounting and Public Policy, Elsevier, vol. 22(3), pages 255-280.
  4. Robert E. Verrecchia & Christian Leuz, 1999. "The Economic Consequences of Increased Disclosure," Working Paper Series: Finance and Accounting 41, Department of Finance, Goethe University Frankfurt am Main.
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