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Differences between Domestic Accounting Standards and IAS: Measurement, Determinants and Implications

Listed author(s):
  • Yuan Ding

    ()

    (CEIBS - Europe International Business School)

  • Ole-Kristian Hope
  • Thomas Jeanjean

    ()

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Hervé Stolowy

    ()

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

This study analyzes determinants and effects of differences between Domestic Accounting Standards (DAS) and International Accounting Standards (IAS). We use an extensive list of differences between DAS and IAS to create two indices, absence and divergence. Absence measures the extent to which the rules regarding certain accounting issues are missing in DAS but are covered in IAS. Divergence applies in circumstances where the rules regarding the same accounting issue differ in DAS and IAS. It measures the extent of differences between DAS-based rules and IAS-based rules. Using a sample of 30 countries for 2001, we show that absence is (mainly) determined by the importance of the equity market and ownership concentration, while divergence is positively associated with the level of economic development and the importance of the accounting profession, but is constrained by the importance of equity markets. Our analysis suggests that a higher level of absence implies more opportunities for earnings management and for decreases in firm-specific information to investors. A larger divergence from IAS is associated with richer firm-specific information in capital markets.

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Paper provided by HAL in its series Working Papers with number hal-00584707.

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Date of creation: 16 Dec 2005
Publication status: Published in 2005
Handle: RePEc:hal:wpaper:hal-00584707
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00584707
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  2. Kurt Auer, 1996. "Capital market reactions to earnings announcements: empirical evidence on the difference in the information content of IAS-based earnings and EC-Directives-based earnings," European Accounting Review, Taylor & Francis Journals, vol. 5(4), pages 587-623.
  3. Ball, Ray & Robin, Ashok & Wu, Joanna Shuang, 2003. "Incentives versus standards: properties of accounting income in four East Asian countries," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 235-270, December.
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  8. Li JIN & Stewart C. MYERS, 2004. "R2 Around the World: New Theory and New Tests," FAME Research Paper Series rp158, International Center for Financial Asset Management and Engineering.
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  12. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
  13. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
  14. Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "The effect of international institutional factors on properties of accounting earnings," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 1-51, February.
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  16. Bernard Raffournier, 1995. "The determinants of voluntary financial disclosure by Swiss listed companies," European Accounting Review, Taylor & Francis Journals, vol. 4(2), pages 261-280.
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  18. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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