The role of firm-specific incentives and country factors in explaining voluntary IAS adoptions: Evidence from private firms

Francis, JR; Khurana, IK; Martin, X; Pereira, R

The role of firm-specific incentives and country factors in explaining voluntary IAS adoptions: Evidence from private firms

Francis, JR Khurana, IK Martin, X Pereira, R

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Publication Type:: Journal Article
Citation:: European Accounting Review, 2008, 17 (2), pp. 331 - 360
Issue Date:: 2008-07-01

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Field	Value	Language
dc.contributor.author	Francis, JR	en_US
dc.contributor.author	Khurana, IK	en_US
dc.contributor.author	Martin, X	en_US
dc.contributor.author	Pereira, R	en_US
dc.date.issued	2008-07-01	en_US
dc.identifier.citation	European Accounting Review, 2008, 17 (2), pp. 331 - 360	en_US
dc.identifier.issn	0963-8180	en_US
dc.identifier.uri	http://hdl.handle.net/10453/32520
dc.description.abstract	This paper investigates voluntary adoptions of International Accounting Standards (IAS) by private enterprises, and builds on prior research which posits that higher quality financial reports through IAS adoption can reduce information asymmetry and facilitate contracting with external parties. Specifically, we pursue the following questions. First, do firm-specific incentives matter in the IAS adoption decision after controlling for country-level institutional factors? Second, does the relative importance of firm vs. country factors vary across institutional settings? Using a sample of 3,722 small and medium-sized private enterprises from 56 countries, we report two primary findings. First, both firm and country factors matter in the voluntary IAS adoption decision. Second, when we focus on sub-samples of countries partitioned by the level of economic development, we find that firm factors dominate country factors in more developed countries, while in less developed countries, country factors dominate firm factors in explaining IAS adoptions. This result is consistent with the argument in Doidge et al. (Journal of Financial Economics, 86(1), pp. 1-39, 2007) that firm incentives are more important in explaining governance choices (including accounting) in more developed countries where the benefits from better governance are more likely to exceed the attendant costs. Collectively, our results suggest that less developed countries can enhance the benefits from IAS adoptions by developing institutions which facilitate private contracting.	en_US
dc.relation.ispartof	European Accounting Review	en_US
dc.relation.isbasedon	10.1080/09638180701819899	en_US
dc.subject.classification	Accounting	en_US
dc.title	The role of firm-specific incentives and country factors in explaining voluntary IAS adoptions: Evidence from private firms	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	17	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	2	en_US
pubs.publication-status	Published	en_US
pubs.volume	17	en_US

Abstract:

This paper investigates voluntary adoptions of International Accounting Standards (IAS) by private enterprises, and builds on prior research which posits that higher quality financial reports through IAS adoption can reduce information asymmetry and facilitate contracting with external parties. Specifically, we pursue the following questions. First, do firm-specific incentives matter in the IAS adoption decision after controlling for country-level institutional factors? Second, does the relative importance of firm vs. country factors vary across institutional settings? Using a sample of 3,722 small and medium-sized private enterprises from 56 countries, we report two primary findings. First, both firm and country factors matter in the voluntary IAS adoption decision. Second, when we focus on sub-samples of countries partitioned by the level of economic development, we find that firm factors dominate country factors in more developed countries, while in less developed countries, country factors dominate firm factors in explaining IAS adoptions. This result is consistent with the argument in Doidge et al. (Journal of Financial Economics, 86(1), pp. 1-39, 2007) that firm incentives are more important in explaining governance choices (including accounting) in more developed countries where the benefits from better governance are more likely to exceed the attendant costs. Collectively, our results suggest that less developed countries can enhance the benefits from IAS adoptions by developing institutions which facilitate private contracting.

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http://hdl.handle.net/10453/32520