強制採用IFRS是否影響應計項目錯誤訂價?以在美國掛牌上市之外國企業為例 - 政大學術集成

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(1)國立政治大學商學院會計研究所碩士論文 Graduate Institute of Accounting College of Commerce National Chengchi University Master Thesis. 強制採用 IFRS 是否影響應計項目錯誤訂價？政治. 大. 立以在美國掛牌上市之外國企業為例. ‧ 國. 學. Does mandatory IFRS adoption affect accruals mispricing?. ‧. Evidence from foreign firms cross-listed in the U.S.. n. er. io. sit. y. Nat. al. Ch. engchi 吳佩珊. i n U. v. Wu, Pei-Shan. 指導教授：詹凌菁博士 Advisor: Chan, Ling-Ching. 中華民國 104 年 6 月 June, 2015.

(2) 謝辭在這兩年的碩士生涯中，靠著許多人給予的幫助、關懷與各種機運，才能順利地完成此碩士論文。首先，深深地感謝我的指導老師，凌菁老師，以無比的耐心引導、協助解決我研究上碰到的困難，每週與老師的討論更是深刻體會到研究的挑戰與樂趣，再次感謝凌菁老師在這些日子的關心與指導。再來，感謝我的同門們—鎮嘉、譯萱、譯模，在寫論文的過程中互相扶持、鼓勵、分享口試完的喜悅；感謝我的好室友徐意婷，幫忙我審視論文中的邏輯、排版、口試排練，以及忍受我各種的壞心情；感謝好友胡胡、高中球隊隊友們，. 政治大此外，還要感謝會計系辦的助教們，給我很多機會與解決我很多行政程序上的疑立. 與你們相聚的時光總能帶給我很多能量，謝謝你們在過程中不斷的關心與支持；. ‧ 國. 學. 問，在系辦工讀的日子因為有你們而更加快樂。. 最後，感謝我的爸媽及哥，給予我無憂的經濟與心靈上的支援，謝謝你們一. ‧. 直以來的照顧，未來步入職場，期許自己能更茁壯、更傑出，成為你們的堅強後. n. al. er. io. sit. y. Nat. 盾。. Ch. engchi. i n U. v. 吳佩珊謹誌於政治大學會計研究所中華民國 104 年 6 月.

(3) Abstract I examine whether the mispricing of accruals among foreign firms cross-listed in the U.S. are affected by the mandatory adoption of International Financial Reporting Standards (IFRS). Consistent with the impact of information environment on the accrual anomaly documented in the literature, I find significant reductions in the annual abnormal returns and in the negative return predictability of discretionary accruals among cross-listers from IFRS adopted countries after IFRS adoption. The evidence implies that irrespective of whether the U.S. adopts IFRS, the mandatory. 政治大 reporting with high quality立 and reducing their information disadvantages.. IFRS adoption elsewhere can still benefit U.S. investors by providing financial. ‧ 國. 學. Keywords: IFRS; Accruals anomaly; Cross-listing. ‧. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v.

(4) 摘要本研究係探討強制採用國際財務報導準則(IFRS)對在美國掛牌上市之外國企業，其應計項目異常現象之影響。實證結果顯示，在美掛牌上市且採用 IFRS 之外國企業，在 2005 年後裁決性應計項目之異常報酬顯著降低。此外，裁決性應計項目之負向報酬預測力亦顯著降低。由此可知，無論美國未來是否採用 IFRS，根據本結論，其餘各國強制採用 IFRS 後，透過提供更高品質之財務報導及降低資訊落差，仍能為美國投資者帶來效益。關鍵字：國際財務報導準則、應計項目異常現象、跨國上市. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v.

(5) Index 1. Introduction .......................................................................................... 1 2. Literature review .................................................................................. 4 2.1. Information environment and securities mispricing ......................................... 4 2.2. Economic benefits of IFRS adoption ................................................................ 6 2.2.1. Improvement in information environments................................................ 6 2.2.2. Benefits in debt markets ............................................................................. 8 2.2.3. Benefits in equity markets .......................................................................... 9. 3. Hypotheses development ....................................................................10. 政治大. 4. Research design ..................................................................................10. 立. Hedge portfolio tests ................................................................................... 11 Regression-based tests ................................................................................ 12. 學. ‧ 國. 4.1. 4.2.. 5. Sample selection and descriptive statistics.........................................13 6. Empirical results .................................................................................21. ‧. Hedge portfolio test .................................................................................... 21. 6.2.. Regression analyses .................................................................................... 23. y. Nat. 6.1.. er. io. sit. 7. Conclusion ..........................................................................................27 Reference ..................................................................................................28. n. al. Ch. engchi. i n U. v. List of Table Table 1 Country distribution of foreign firms cross-listed in the U.S. ........................ 15 Table 2 Descriptive statistics........................................................................................ 18 Table 3 Pearson correlation .......................................................................................... 20 Table 4 Hedge portfolio tests ....................................................................................... 22 Table 5 Regression-based tests .................................................................................... 25. i.

(6) 1. Introduction Globalization has broadened the capital markets among different countries and there are many companies cross-listed in one of the biggest economic entity-the United States. These cross-listed companies seek to obtain more source of capital from the U.S. investors. However, firms cross-listed in the U.S. have to deal with more difficulties than their counterparts listed in the domestic capital market. Specifically, they have to meet strict regulatory environment and be under the. 政治大 firms fall under the U.S. securities laws, the U.S. investors in these companies are 立. Securities and Exchange Commission (SEC) oversight. Also, since the cross-listed. protected the same as the investors in the U.S domestic firms. Besides these. ‧ 國. 學. differences between the cross-listed firms and their counterparts in the home countries,. ‧. firms cross-listed in the U.S. still have to face more obstacles than the U.S. domestic. sit. y. Nat. companies do. First, because the U.S. investors lack local knowledge, they are. io. er. expected to rely more on the relevant information provided in the financial reports issued by the cross-listed firms. Second, although foreign companies are required to. al. n. v i n C hprepared under foreign reconcile the financial information accounting standards into engchi U the U.S GAAP through Form 20-F, such reconciliation may not thoroughly eliminate. the discrepancies in the accounting information in the views of U.S. investors. As a result, these foreign companies are involved in more difficult information environment and the quality of financial statements provided by these firms is lower perceived by the U.S. investors, and thus the securities mispricing exists among these firms. Prior research studies document that the cause of mispricing might have been the accruals anomaly and the information environment plays an important role in the formation of mispricing. That is, with more transparent information environment, 1.

(7) investors and analysts can access to the information more easily, interpret the information revealed in the financial statements more accurately, and distinguish the earning persistence between the accruals component and the cash flows component. Furthermore, Drake et al. (2007) confirm that better disclosure in the accounting information reduces the mispricing of accruals. Based on the arguments mentioned above, I examine whether the mandatory adoption of International Financial Reporting Standards (IFRS) in foreign firms’ home countries reduces the mispricing of discretionary accruals among the firms. 政治大 2003), is comparable within the U.S. economic system (Barth et al. 2012), improves 立 cross-listed in the U.S. Since IFRS is a set of high quality accounting standards (Leuz. analyst forecasting environment (Horton et al. 2013), provides greater equity value. ‧ 國. 學. relevance and information content (Leuz and Wysocki 2008; Landsman et al. 2012),. ‧. the mandatory IFRS in the home countries of cross-listed firms could have enhanced. sit. y. Nat. the information environment and increased the capital market efficiency and thus. io. er. reduced the mispricing.. I test the prediction using a treatment group of 859 firm-year observations of. n. al. Ch. mandatory IFRS adopters among 23 countries,. engchi. v i n and U two control. groups of 846. firm-year observations of non-IFRS adopters that do not adopt IFRS over the testing period and of 859 comparable matched U.S.-domiciled firms respectively. The research methodology consists of hedge portfolio tests that investigate whether the discretionary accruals-based trading strategy implemented by investors produces less abnormal returns among cross-listers from IFRS adopted countries following the mandatory IFRS adoption, and regression-based tests that examine whether the negative return predictability of discretionary accruals decreases among cross-listed firms from IFRS countries in the post-IFRS period. I find a significant decrease in accruals anomaly among cross-listers from 2.

(8) mandatory IFRS countries from the pre- to the post-IFRS period. In particular, in the hedge portfolio tests, cross-listers from IFRS countries experience over 78% reduction of annual abnormal returns. The changes associated with two control groups are insignificant, which help to mitigate the possibility that the decreases associated with cross-listers from IFRS countries are due to some unidentified confounding effects. These findings are consistent with the prediction that the mandatory IFRS adoption reduces mispricing of discretionary accruals among cross-listed firms from IFRS countries.. 政治大 evidence on whether the regulatory intervention, i.e. the mandatory IFRS adoption, 立 This study can contribute to the literature in two ways. First, the results provide. can benefit the capital market by reducing the mispricing. That is, the results can. ‧ 國. 學. show whether the mandatory IFRS elsewhere in other countries can benefit the U.S. ‧. investors by providing more comparable information and reducing their information. sit. y. Nat. disadvantages, regardless of whether the U.S. adopts IFRS. Second, the findings can. io. er. reveal evidence for the incentive versus standards debate in the literature. Prior researches (e.g., Ball et al. 2003; Christensen et al. 2008) argue that disclosure. al. n. v i n incentives are more important C than accounting standards h e n g c h i U in evaluating the financial. reporting quality. Because of stricter regulatory environment in the U.S., the cross-listed firms have greater incentives than their domestic counterparts. Therefore, evidence that the accruals anomaly is reduced among a group of firms with higher disclosure incentives adds evidence that accounting standards also play a role in determining the quality of financial reporting. The reminder of this study is organized as follows. Section 2 reviews prior literature. Section 3 presents the hypothesis development. Section 4 discusses the sample selection and the descriptive statistics of variables. Section 5 reports the research design and section 6 presents the empirical results. Section 7 concludes. 3.

(9) 2. Literature review 2.1. Information environment and securities mispricing Sloan (1996) first examines the information revealed in the accrual and cash flow components of earnings and how this information is reflected in stock prices. The results indicate that the accrual component exhibits lower persistence than the cash flow component does and that the investors fail to distinguish the differential persistence between the accrual and cash flow components in reported earnings and thus misprice the securities.. 政治大. Following this study, many researches examine the underlying causes of this. 立. mispricing of accruals and investigate the effects of changes in information. ‧ 國. 學. environment on the reduction of mispricing. Chan et al. (2009) harnesses a unique set. ‧. of accounting regulation change in the UK, i.e. the introduction of Financial Reporting Standard No.3: Reporting Financial Performance (FRS3) to examine how. y. Nat. io. sit. changes in accounting information quality affect the accruals anomaly and the. n. al. er. mispricing. They compare changes in the magnitude of accruals anomaly before and. Ch. i n U. v. after FRS3 periods in the UK and find that there is a significant reduction of accruals. engchi. anomaly from the pre- to post-FRS3 periods and this reduction is driven by the companies with low accounting information quality. These findings are consistent with their predication that companies with lower accounting information quality are more sensitive to the mandatory financial standards change. Besides cases in the UK, Lee et al. (2014) examines whether the introduction of fair disclosure regulation, SOX, and other analyst regulations reduces security mispricing in the U.S. That is, they investigate whether the regulations introduced in the U.S increase informational efficiency by reducing security mispricing in U.S stock markets. They find that a greater decrease in security mispricing occurs among firms 4.

(10) with lower accruals quality, smaller size, shorter listing history, lower analyst coverage, higher analyst forecast dispersion, higher cash flow volatility, and higher stock return volatility. Also, from the pre- and post-regulations periods, they observe significant declines in short-term price continuation effects based on analyst forecast revisions and earnings announcements. However, these two literatures examine the effects of the improved information environment due to changes in regulations and accounting standards on the security mispricing in the country where those changes are implemented. As a result, this study. 政治大 IFRS adoption in foreign firms’ home countries reduces the accruals anomaly among 立 differs from these researches by providing evidences that whether the mandatory. firms cross-listed in the U.S, even though U.S still apply US GAAP.. ‧ 國. 學. In addition to changes in standards and regulations that can affect the mispricing. ‧. of accruals, Drake et al. (2007) examine whether higher quality of disclosure reduces. sit. y. Nat. the mispricing of accruals and cash flows. In other words, they investigate whether. io. er. investors price securities more accurately if they better understand the information in accruals and cash flows about future earnings in firms with higher disclosure quality.. al. n. v i n C hdisclosure also reduces Their results show that high-quality the mispricing of another engchi U component of earnings, namely, cash flow, in addition to accruals component. This. evidence is important because it provides a more completed picture of the relationship between disclosure quality and the mispricing of the components of earnings. Finally, they provide the notion that high-quality overall disclosure, rather than the specific disclosure of the accruals component, can reduce the mispricing of earnings component. Knowing the positive relation between higher accounting information quality and less accruals mispricing, Radhakrishnan et al. (2014) examines whether firms with earnings and cash flow forecast experience less accruals anomaly than those with only 5.

(11) earnings forecast. They argue that when analysts issue cash flow and earnings forecast for a firm, they indirectly provide forecasts for accruals as well, helping investors better assess the implication of accruals on future earnings. Using cross-sectional and time-series designs, they collectively provide evidence that earnings and cash flow forecast firms have less accruals mispricing and cash flow mispricing than firms with earnings forecast.. 2.2. Economic benefits of IFRS adoption 2.2.1. Improvement in information environments. 政治大. IFRS is a set of high quality financial statements and its objective is to provide. 立. relevant and comparable information to users of accounting information (Leuz 2003;. ‧ 國. 學. Bartov, Goldberg, and Kim 2005). The mandatory IFRS adaption benefits capital markets in many ways. For example, Horton et al. (2013) observe that prior. ‧. researches often provide conflicting evidence and fail to separate between information. y. Nat. sit. quality and comparability, the benefits of IFRS adoption. Therefore, they investigate. n. al. er. io. which attributes of IFRS cause an improvement in the information environment. i n U. v. proxied by decrease in analyst forecast errors. Employing individual analyst level data. Ch. engchi. and isolating settings where analysts would benefit from either improved comparability or higher information quality, they find that the improvement in the information environment is driven both by information and comparability effects. An increasing body of research analyzes the quality of accounting information associated with IFRS adoption, and provides mixed evidence whether the accounting amounts from such accounting standards exhibit higher quality than those do from domestic accounting standards (Leuz and Wysocki 2008). Landsman et al. (2012) add to this literature by investigating whether the information content of earnings announcement, one dimension of accounting quality, increases in countries that 6.

(12) mandate IFRS adoption relative to countries that remain domestic accounting standards. They find that increases in the information content of earnings announcement, abnormal return volatility and abnormal trading volume, for countries mandating IFRS adoption. DeFond et al. (2011) examines the assertion that the mandatory IFRS adoption increases financial statement comparability, which in turn attracts more cross-border investment, by testing whether the mandatory IFRS adoption in EU in 2005 results in improved comparability that leads to increased investment by foreign mutual funds.. 政治大 predict standards uniformity to improve comparability only when the standards are 立. Knowing that the improvement to comparability is likely to vary across adopters, they. credibly implemented. Using a difference-in-differences test, they find that following. ‧ 國. 學. the mandatory IFRS adoption foreign mutual funds increase their ownership in. ‧. mandatory IFRS adopters that are in countries with strong implementation credibility,. sit. y. Nat. and that the increase in ownership is more pronounced in firms experiencing greater. io. er. increases in uniformity.. In addition to focusing on the advantages of increased comparability among IFRS. n. al. adoption countries, existing. ni C h also addressU the literature engchi. v. improved comparability. between IFRS adopted countries and non-IFRS adopted countries. Barth et al. (2012) investigates the extent to which the application of IFRS by non-U.S. firms results in accounting amounts that are comparable to those resulting from the application of US GAAP by U.S. firms. Using two approaches to assess the comparability, the results are relevant to the debates relating to possible use of IFRS by U.S. firms. They find that non-U.S. firms applying IFRS have significantly greater accounting system and value relevance comparability with U.S. firms applying US GAAP when they apply IFRS than when they applied non-U.S. domestic standards. This comparability could give better access for U.S. investors to interpret the accounting information presented 7.

(13) in the financial statements and thus may reduce the mispricing among foreign firms. 2.2.2. Benefits in debt markets Existing literature has a strong focus on how the improvements in information environment under IFRS benefit the equity and debt capital markets. For example, Beneish et al. (2012) investigate whether the mandatory IFRS adoption has a differential impact on debt and equity markets by providing macroeconomic evidence. They find that IFRS adoption has a greater effect on foreign debt than on equity investment markets. Moreover, they find that increases in equity markets are limited. 政治大 increases in equity and debt investments derive from the U.S. and other non-IFRS 立 to countries with high governance quality. Finally, they provide evidence that. ‧ 國. 學. adoption countries, rather than from other adopting countries. This result suggests that the benefits from the mandatory IFRS adoption are more likely attributed to. ‧. improvement in financial reporting quality rather than greater comparability.. sit. y. Nat. Chan et al. (2013) examine whether the credit ratings of foreign firms cross-listed. io. er. in the U.S. are affected by the mandatory adoption of IFRS in their home country.. al. v i n financial reporting quality for C two U provides firms with more h reasons. e n g cFirst, h i IFRS n. They contend that the switch from domestic standards to IFRS could affect the. flexibility to disclose forward-looking information to reduce the information asymmetry with outsiders. Second, IFRS improves the cross-border comparability of financial information and in turn reduces the ability of firms to distort their performance. through. their. domestic. accounting. standards.. Using. a. difference-in-difference test design, they find that a significant increase in credit ratings among firms cross-listed in the U.S. from countries that mandated IFRS, relative to their comparable U.S.-domiciled firms. Moreover, they observe that the increase in more pronounced among those firms from countries where the difference 8.

(14) between the previous domestic standards and IFRS is greater. Therefore, combining these findings, they infer that the increased credit rating effect can be attributed to improved financial information quality under IFRS. 2.2.3. Benefits in equity markets Daske et al. (2008) examine the economic consequences of mandatory IFRS reporting in equity markets. In particular, they analyze effects in stock market liquidity, cost of capital, and firms’ equity valuations. For the first economic effect, they find that mandatory IFRS adopters experience larger increase in market liquidity. 政治大 that the cost of capital decreases and valuation increases when they account for the 立 than a random sample of non-adopting benchmark firms. Moreover, they document. ‧ 國. 學. possibility that markets already anticipate the effects of mandatory IFRS adoption and measure the effects one year before the official adoption date.. ‧. Prather-Kinsey et al. (2008) investigate the stock market reactions associated. sit. y. Nat. with IFRS adoption in EU by comparing the value relevance of book values before. io. er. and after IFRS adoption and examining the cost of capital effect. Using a sample of. al. v i n C hmore value relevant financial reports of IFRS adopters e n g c h i U and informative. Moreover, n. 157 European firms in 2005, they find that capital markets participants consider. they observe that these improvements in information quality lead to a decrease in cost of capital. Li (2010) provides further evidence for the cost of equity capital effects of mandatory IFRS adoption. She tests whether the mandatory IFRS adoption affects the cost of equity capital in 18 EU countries during the period from 1996 to 2006. The findings are that the mandatory adopters experience significant decreases in the cost of equity of 47 basis points and that these decreases are significant only in countries with strong legal enforcement. Finally, she finds that increased disclosure and 9.

(15) improved comparability associated with the adoption of IFRS are two mechanisms behind the reduced cost of equity.. 3. Hypotheses development Given the evidences regarding the association between the improved information environment and the reduced mispricing of accruals, I predict that the mandatory IFRS adoption reduces the mispricing of foreign firms cross-listed in the U.S. for three reasons. First, IFRS is recognized as a high quality set of accounting standards,. 政治大 investors so that they can better distinguish the difference between the earnings 立. which can improve the information environment and provide relevant information for. components. Second, IFRS requires more extent to which financial and nonfinancial. ‧ 國. 學. information are disclosed and prior researches have suggested that high-quality. ‧. disclosure can reduce the mispricing of securities. As a result, with more required. sit. y. Nat. disclosure in IFRS, the mispricing could also decrease due to the mandatory IFRS. io. er. adoption. Finally, since prior literature suggests that the IFRS-based and the US GAAP-based amounts are comparable, implying that IFRS can fit well in the U.S.. al. n. v i n C hIFRS adoption inUforeign firms’ home countries economic system, the mandatory engchi could potentially affect the accruals anomaly of those firms cross-listed in the U.S.. Thus, the hypothesis is: H1: Foreign firms cross-listed in the U.S market exhibit lower mispricing of discretionary accruals following the mandatory IFRS adoption.. 4. Research design To test the prediction that the mandatory IFRS adoption would affect the mispricing of discretionary accruals, I perform hedge portfolio tests and 10.

(16) return-discretional accruals regressions and compare the results of firms cross-listed in the U.S. from countries that mandate IFRS with their comparable U.S.-domiciled firms and with cross-listers from non-IFRS adoption countries.. 4.1. Hedge portfolio tests The hedge portfolio test mimics trading strategies based on accruals that are implemented by investors. I develop portfolios by independently sorting stocks into terciles based on levels of discretionary accruals, where discretionary accruals are estimated from the modified Jones (1991) model following Kothari et al. (2005). The. 政治大. hedge portfolio returns are the returns spread between the lowest and highest. 立. discretionary accruals terciles. Based on the modified Fama-French (1996) four-factor. ‧ 國. 學. model (FFM), the portfolio abnormal returns are equivalent to the intercept of the following time-series regression:. ‧. 𝑅𝑝,𝑡 − 𝑅𝑓𝑡 = 𝛼𝑝 + 𝛽𝑝 (𝑅𝑚𝑡 − 𝑅𝑓𝑡 ) + 𝑠𝑝 𝑆𝑀𝐵𝑡 + ℎ𝑝 𝐻𝑀𝐿𝑡 + 𝑢𝑝 𝑈𝑀𝐷𝑡 + 𝜀𝑝,𝑡. Nat. y. (1). er. io. sit. where 𝑅𝑝,𝑡 is the return of the test tercile portfolio p in month t, 𝑅𝑓𝑡 is the risk-free return in month t proxied by the U.S. 30-days treasury bill yield, 𝑅𝑚𝑡 is the return of. al. n. v i n C h by NYSE value-weighted market portfolio in month t proxied yield, engchi U. 𝑆𝑀𝐵𝑡 is the. month t value-weighted return measured by the return of (S)mall (M)inus (B)ig companies, 𝐻𝑀𝐿𝑡 is the month t value-weighted return constructed by the return of (H)igh (M)inus (L)ow book-to-market value companies, 𝑈𝑀𝐷𝑡 is the momentum factor, factor coefficients 𝛽𝑝 , 𝑠𝑝 , ℎ𝑝 , and 𝑢𝑝 capture portfolio risk exposures, and 𝛼𝑝 is interpreted as the portfolio abnormal return after controlling four risk-factors. I annualize the alpha by multiplying 12 and expect that there is a decline in hedge portfolio abnormal returns from the pre- to the post-IFRS period. To mitigate the possibility that the evidence is driven by some confounding. factors, I also report the results of two sets of control samples. The first set of control 11.

(17) firms is cross-listed companies from non-IFRS adoption countries. The second set of control groups is matched U.S.-domiciled firms. I identify a set of comparable U.S. firms for each cross-listers from IFRS countries by matching with year, industry, and sales growth. I do not expect to find any abnormal return differences from the pre- to the post-IFRS period among these two control groups.. 4.2. Regression-based tests This regression provides evidence for time-series unobservable impact and controls for additional variables argued in the existing literature to be associated with. 政治大. the formation of accruals anomaly. I perform the following regression:. 立. 𝑆𝐴𝑅𝐸𝑇𝑖,𝑡+1 = 𝛾0 + 𝛾1 𝑅_𝐷𝐴𝐶𝐶𝑖,𝑡 + 𝛾2 𝑅_𝑂𝐶𝐹𝑖,𝑡 + 𝛾3 𝑃𝑅𝐸𝑖,𝑡 + 𝛾4 𝑅_𝐷𝐴𝐶𝐶𝑖,𝑡 × 𝑃𝑅𝐸𝑖,𝑡. ‧ 國. 學. + 𝛾5 𝑅_𝑂𝐶𝐹𝑖,𝑡 × 𝑃𝑅𝐸𝑖,𝑡 + 𝛾6 𝑀𝑉𝑖,𝑡 + 𝛾7 𝐵𝑀𝑖,𝑡 + 𝛾8 𝐶𝑃𝑖,𝑡 + 𝛾9 𝑅𝑉𝐴𝑅𝑖,𝑡. ‧. + 𝜀𝑖,𝑡. (2). sit. y. Nat. where 𝑆𝐴𝑅𝐸𝑇𝑖,𝑡+1 is the annual size-adjusted return calculated as the difference. io. er. between the raw buy-and-hold return of each firm and the return of matched portfolio to which each firm is assigned, 𝐷𝐴𝐶𝐶𝑖,𝑡 is discretionary accruals estimated from the. al. n. v i n C h Kothari et al. U modified Jones (1991) model following (2005), and engchi. 𝑂𝐶𝐹𝑖,𝑡 is operating. cash flow divided by total assets, R_DACC and R_OCF are the annual decile rank of discretionary accruals and operating cash flow, scaled to range from 0 to 1, 𝑃𝑅𝐸𝑖,𝑡 is a dummy variable assigned to 1 for pre-IFRS period, , 𝑀𝑉𝑖,𝑡 is the log of market value, 𝐵𝑀𝑖,𝑡 is the book-to-market ratio, 𝐶𝑃𝑖,𝑡 is the cash flow-to-price ratio, and 𝑅𝑉𝐴𝑅𝑖,𝑡 is the residual variance estimated from the Fama and French (1996) three-factor model. Coefficient 𝛾1 captures the return predictability of discretionary accruals in the post-IFRS period and 𝛾4 indicates the incremental effect in the pre-IFRS period. Following Lang et al. (2006), I identify matched U.S.-domiciled firms for each 12.

(18) firm-year observation of cross-listers based on matching year, industry, and sales growth. Because the U.S. matched firms are not experiencing the mandatory IFRS adoption but will be affected by any other factors in the U.S. capital market, they serve as a direct control group for those identified foreign firms. Moreover, to control for other factors that U.S.-domiciled firms may not able to capture but could still influence cross-listers, I also perform regression-based tests separately on a sample consisting of foreign firms cross-listed in the U.S. from countries that have not mandated IFRS.. 5.. 治政大 Sample selection and descriptive statistics 立. I collect all accounting data and market-based data on Compustat and CRSP from. ‧ 國. 學. year 2003 to year 2008. To test the impact of IFRS adoption on the mispricing of. ‧. discretionary accruals, I define the pre-IFRS period as 2003-2004 and the post-period. sit. y. Nat. as 2005-2008. Following the existing literatures (e.g., Beaulieu and Bellemare 2000;. io. er. Hail and Leuz 2008), I exclude Canadian firms because the capital market of Canada and the U.S. are highly integrated and the cross-listing motives of Canadian. al. n. v i n C h of companies inUother countries. In addition to companies are different from those engchi. addressing the similarity of capital market issue, following the existing literatures (e.g., Doidge et al. 2009; Sarkissian and Schill 2009), I exclude firms from tax havens such as Bermuda and the Virgin Islands since many of these firms are actually U.S. firms that have acquired a foreign status to experience tax advantages. Excluding firms that had mandated IFRS but had not done by the fiscal year-end on December 31, 2005, I can compare the extent of accruals anomaly firms experienced before and after the adoption of IFRS with any mispricing of discretionary accruals experienced by their comparable U.S. firms or by foreign firms from non-IFRS adoption countries from the same fiscal year-end. Finally, I exclude firms with missing any of the 13.

(19) accounting data or market-based data required for portfolio and regression tests and exclude foreign companies for which no comparable U.S.-matched firms can be identified. The final sample contains 1705 firm-year observations of foreign firms cross-listed in the U.S., including 859 firm-year observations from countries that mandated IFRS adoption and 846 firm-year observations from countries that did not adopt IFRS over the sample period. Table 1 presents the country distribution of foreign firms in the sample. Among 23 countries in panel A, U.K. represents the biggest portion,. 政治大 cross-listed firms from mandatory IFRS countries. On the other hand, Israel accounts 立. contributing 177 firm-year observations, about 21% in the sample of foreign. for the largest proportion in panel B, amounting 319 firm-year observations, about. ‧ 國. 學. 38% in the sample of non-IFRS adoption countries.. ‧. n. er. io. sit. y. Nat. al. Ch. engchi. 14. i n U. v.

(20) Table 1 Country distribution of foreign firms cross-listed in the U.S. Panel A: Mandatory IFRS adoption countries Country. Number of Observations. Number of Firms. Australia. 35. 13. Austria. 2. 1. Belgium. 7. 2. Denmark. 20. 5. Finland. 14. 4. France. 85. 24. Germany. 64. 18. Greece Hong Kong. 立. Hungary. Spain Sweden. 9 9. al. 37. Ch. e n10g c h i U 10. y. 3. n. South Africa. 14. io. Portugal. 88. sit. Philippine. 32. Nat. Peru. 27. 22. er. Norway. 1. ‧. Netherland. 10. 學. Luxemburg. 2. 102. ‧ 國. Ireland Italy. 政 34 治大 6 7. v ni. 9 10 26 5 1 2 2 9 4 4. Switzerland. 67. 15. U.K. 177. 58. Total. 859. 247. Panel B: Non-IFRS adoption Countries Country. Number of Observations. Number of firms. Argentina. 40. 10. Brazil. 38. 9. Chile. 52. 14. China. 54. 13. India. 44. 11. Indonesia. 11. 2. 15.

(21) Table 1 (continued) Israel. 319. 82. Japan. 127. 29. Korea. 34. 10. Mexico. 69. 23. Russia. 22. 5. Taiwan. 33. 7. Venezuela. 3. 1. 846. 216. Total. This table presents distribution of countries included in the analyses. Panel A reports a distribution of cross-listers from countries that mandate IFRS, and Panel B provides information of cross-listed firms from non-IFRS adoption countries. The test period covers from fiscal year ending in December. 政治大 Table 2 exhibits descriptive statistics of the main variables for the treatment 立. 2003 to 2008.. group, namely, cross-listers from mandatory IFRS countries, and for the two control. ‧ 國. 學. groups, i.e., cross-listers from non-IFRS adoption countries, and matched comparable. ‧. U.S. firms respectively. From pre- to post-IFRS period, there is no statistically. sit. y. Nat. significant change in the mean value of size-adjusted return (SARET), for either the. io. er. cross-listers from mandatory IFRS countries, or their comparable U.S. firms. As for control variables, discretionary accruals (DACC), log market value (MV), and. al. n. v i n residual variance (RVAR) showC significantly between two periods for the h e n g cdifferences hi U. cross-listers from countries mandating IFRS. For the cross-listed firms from non-IFRS adoption countries, discretionary accruals (DACC), book to market value (BM) and residual variance (RVAR) differ between two periods. As for the comparable U.S.-domiciled firms, only discretionary accruals (DACC), book to market value (BM) show difference from pre- to post-IFRS period. Besides the comparison between pre- and post-IFRS periods for each of three groups, I compare the difference in the mean values of the main variables between sub-samples. For the comparison between cross-listers from IFRS and non-IFRS countries, there are 16.

(22) significant differences in the mean values of DACC, MV, BM, and RVAR in both the pre- and the post-IFRS periods. However, for cross-listers from IFRS countries and their matched U.S. firms, there are significant differences in the average levels of OCF, MV, BM, and RVAR. Table 3 exhibits the correlation of variables for cross-listers from IFRS and non-IFRS countries. In particular, operating cash flows (OCF) and log market value (MV) are significantly, negatively correlated with discretionary accruals (DACC), and residual variance is positively correlated with discretionary accruals (DACC).. 政治大 and is positively correlated with book to market value (BM) at 1 percent level of 立. Size-adjusted return (SARET) is negatively correlated with log market value (MV). significance.. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 17. i n U. v.

(23) Table 2 Descriptive statistics Panel A: Cross-listed foreign firms from mandatory IFRS adoption countries (859 observations) Mean DACC OCF SARET MV. Median. Std. Dev.. Pre-IFRS. -0.175. a. -0.073. 0.705. Post-IFRS. -0.100. -0.035. 0.275. Pre-IFRS. 0.097. 0.104. 0.153. Post-IFRS. 0.104. 0.111. 0.168. Pre-IFRS. 0.034. -0.011. 0.420. Post-IFRS. 0.120. 0.029. 0.601. a. 8.658. 2.100. 8.760 9.171 治政 0.506 0.455 大 0.478 0.376. 2.163. Pre-IFRS. 8.238. Post-IFRS BM. Pre-IFRS Post-IFRS Pre-IFRS. 35.123. 12.540. 0.445. 141.974. Pre-IFRS. 0.015. a. 0.007. 0.024. Post-IFRS. 0.011. 0.006. 0.015. 學. 0.984. Post-IFRS RVAR. 0.449. 5.884. ‧. ‧ 國. CP. 立. 0.378. Nat. Post-IFRS OCF. Pre-IFRS Post-IFRS. SARET MV. CP RVAR. 0.027. sit. Median. a,b. C h-0.049 engchi 0.077 b. 0.097 a. iv n U-0.008 0.000. Std. Dev. 0.636 0.342. 0.086. 0.163. 0.098. 0.131. -0.088. 0.404. Pre-IFRS. -0.025. Post-IFRS. 0.157. 0.026. 0.768. 6.955. b. 6.996. 2.278. 7.191. b. 7.415. 2.580. a,b. 0.549. 0.405. Post-IFRS. 0.727. b. 0.565. 0.684. Pre-IFRS. 2.761. 0.116. 25.690. Post-IFRS. 2.797. Pre-IFRS Post-IFRS. BM. al. n. Pre-IFRS. Mean. er. io. DACC. y. Panel B: Cross-listed foreign firms from non-IFRS adoption countries (846 observations). Pre-IFRS. Pre-IFRS Post-IFRS. 0.601. 0.023. 0.545. 38.378. a,b. 0.011. 0.033. b. 0.009. 0.022. 0.017. 18.

(24) Table 2 (continued) Panel C: Comparable U.S. firms for cross-listers from mandatory IFRS countries (859 observations) DACC OCF SARET MV BM. Mean. Median. Std. Dev.. Pre-IFRS. -0.163a. -0.038. 0.727. Post-IFRS. -0.065. -0.023. 0.324. Pre-IFRS. 0.061c. 0.080. 0.203. Post-IFRS. 0.057. c. 0.079. 0.203. Pre-IFRS. 0.020. -0.066. 0.482. Post-IFRS. 0.069. -0.029. 0.692. Pre-IFRS. 6.509. c. 6.509. 2.118. Post-IFRS. 6.600. c. 6.475. 2.231. Pre-IFRS. 0.454a,c. 0.412 治政 0.544 0.434 大 2.579 0.144. 0.332. Post-IFRS CP. Pre-IFRS Pre-IFRS Post-IFRS. 16.421. 7.809. 0.052. 0.021c. 0.010. 0.029. c. 0.011. 0.023. 0.019. 111.784. 學. RVAR. ‧ 國. Post-IFRS. 立. 0.688. ‧. This table presents summary statistics for cross-listers from IFRS adoption countries and the two control groups (i.e., cross-listers from non-IFRS adoption countries and comparable U.S.-domiciled. sit. y. Nat. firms). The sample period covers from fiscal year ending in December 2003 to 2008.. Indicates 5 percent level of significance in mean difference between cross-listers from mandatory. n. al. er. Indicates 5 percent level of significance in mean difference between pre- and post-IFRS periods.. b. io. a. Ch. IFRS countries and from non-IFRS adoption countries. c. engchi. i n U. v. Indicates 5 percent level of significance in mean difference between cross-listed firms from. mandatory IFRS countries and their matched comparable U.S.-domiciled firms. Variable definitions DACC = Discretionary accruals estimated from the modified Jones (1991) model following Kothari et al. (2005) OCF = Operating cash flow SARET = Annual size-adjusted return calculated as the difference between the raw buy-and-hold return of each firm and the return of matched portfolio to which each firm is assigned MV = Log of market value BM = Book-to-market ratio CP = Cash flow-to-price ratio RVAR = Residual variance estimated from the Fama and French (1996) three-factor model. 19.

(25) Table 3 Pearson correlation N = 1705 Prob > |r|: Rho=0 DACC DACC. 1.000. OCF. -0.150. OCF. SARET. MV. BM. CP. RVAR. 1.000. (<.0001). MV. -0.002. -0.023. (0.926). (0.343). -0.118. 0.466. (<.0001) BM. -0.138. 治政 0.232 -0.270 大 1.000. 立. (<.0001) (<.0001) (<.0001). -0.013. 0.020. 0.000. 0.081. 0.015. (0.601). (0.407). (0.990). (0.001). (0.546). 0.108. -0.357. 0.039. -0.513. -0.058. (<.0001). (<.0001). (0.106). (<.0001). (0.017). ‧. Nat. Variable definitions. ‧ 國. RVAR. 1.000. 學. CP. -0.132. (<.0001) (<.0001). 0.027 (0.273). 1.000. 1.000 -0.032. 1.000. (0.192). y. SARET. al. er. io. (2005). sit. DACC = Discretionary accruals estimated from the modified Jones (1991) model following Kothari et al.. n. OCF = Operating cash flow divided by total assets. Ch. i n U. v. SARET = Annual size-adjusted return calculated as the difference between the raw buy-and-hold return of. engchi. each firm and the return of matched portfolio to which each firm is assigned MV = Log of market value BM = Book-to-market ratio CP = Cash flow-to-price ratio RVAR = Residual variance estimated from the Fama and French (1996) three-factor model. 20.

(26) 6. Empirical results 6.1. Hedge portfolio test To analyze the impact of mandatory IFRS adoption on the profitability of a trading strategy based on accruals and implemented by the investors, I employ the hedge portfolio test. Table 4 reports the annual abnormal returns of hedge portfolios constructed by sorting stocks into terciles based on discretionary accruals levels and assigning long position in lowest discretionary accruals tercile and short position in highest discretionary accruals tercile.. 政治大. Table 4 reports the results of the treatment group (cross-listed from IFRS. 立. countries), and two control groups (cross-listers from non-IFRS adoption countries. ‧ 國. 學. and comparable U.S.-domiciled firms for the cross-listers from mandatory IFRS. ‧. adoption countries). In panel A, the annual abnormal return over the full test period is positive and statistically significant for cross-listers from IFRS countries. Furthermore,. y. Nat. io. sit. the return decreases from 12.8% in pre-IFRS to 2.7% in post-IFRS periods and the. n. al. er. difference is statistically significant (10.1%, p-value=0.0976). Therefore, this. Ch. i n U. v. evidence suggests that the mandatory adoption of IFRS reduces mispricing of. engchi. discretionary accruals for foreign companies cross-listed from countries mandating IFRS adoption. If empirical findings consistent with H1 can indeed be attributed to the change in accounting standards that I examine, as opposed to some unidentified confounding effects, then I would expect to observe the findings to be more pronounced in cross-listers from IFRS countries than those from non-IFRS countries. Panel B provides the results of cross-listers from non-IFRS countries and shows that the annual abnormal return in pre-IFRS period is positive and significant, while the return difference between two periods is statistically insignificant. Moreover, panel C shows 21.

(27) that both the abnormal return in the pre-IFRS period and the return difference are insignificant. That is, the matched U.S.-domiciled firms experience no significant decrease in the annual abnormal return. The findings in Panels B and C help mitigate the possibility that the evidence consistent with hypothesis H1 is driven by confounding effects such as changes in macroeconomic factors around the time of mandatory IFRS adoption. Overall, the results in Table 4 suggest that IFRS reduced mispricing of discretionary accruals among cross-listed firms from mandatory IFRS countries. Table 4 Hedge portfolio tests. 政治大. This table provides the annual abnormal returns (p-value) of hedge portfolios sorted on discretionary. 立. accruals. Stocks are sorted into tercile portfolios based on discretionary accruals, which are estimated from the modified Jones (1991) model following Kothari et al. (2005). Zero-investment hedge. ‧ 國. 學. portfolio consists of a long (short) position in the low (high) accruals tercile. The alpha is the intercept estimated from the modified Fama and French four-factor model:. ‧. 𝑅𝑝,𝑡 − 𝑅𝑓𝑡 = 𝛼𝑝 + 𝛽𝑝 (𝑅𝑚𝑡 − 𝑅𝑓𝑡 ) + 𝑠𝑝 𝑆𝑀𝐵𝑡 + ℎ𝑝 𝐻𝑀𝐿𝑡 + 𝑢𝑝 𝑈𝑀𝐷𝑡 + 𝜀𝑝,𝑡 For each month t 𝑅𝑝,𝑡 is the hedge portfolio return, 𝑅𝑓𝑡 is risk-free return proxied by U.S. 30-days. y. Nat. treasury bill yield, 𝑅𝑚𝑡 is the return of market proxied by NYSE value-weighted return, 𝑆𝑀𝐵𝑡 is. sit. the return of factor-mimicking portfolio established by the return of (S)mall (M)inus (B)ig companies,. al. er. io. 𝐻𝑀𝐿𝑡 is return of factor-mimicking portfolio constructed by the return of (H)igh (M)inus (L)ow. n. companies, and 𝑈𝑀𝐷𝑡 is the momentum factor. The alpha is annualized through multiplication of. Ch. i n U. v. 12. The analyses are conducted separately in cross-listed firms from mandatory IFRS countries (Panel. engchi. A), cross-listed firms from non-IFRS adoption countries (Panel B), and comparable U.S.-domiciled firms for cross-listers from countries mandating IFRS (Panel C). The p-values are two-tailed.. Panel A: Cross-listers from IFRS adoption countries (859 observations). Alpha (p-value). Full period. 0.050 (0.0356). Pre-IFRS Post-IFRS. 0.128 (0.0461) 0.027 (0.1437) 0.101 (0.0976). Pre-IFRS − Post-IFRS Panel B: Cross-listers from non-IFRS adoption countries (846 observations) Full period Pre-IFRS. 0.023 (0.3281) 0.086 (0.0961) 22.

(28) Table 4 (continued) Post-IFRS. 0.011 (0.6128) 0.075 (0.1553). Pre-IFRS − Post-IFRS. Panel C: Comparable U.S.-domiciled firms for cross-listers from IFRS countries (859 observations) Full period Pre-IFRS Post-IFRS. 0.031 (0.1945) 0.093 (0.1011) 0.009 (0.6834) 0.084 (0.1451). Pre-IFRS − Post-IFRS. 6.2. Regression analyses. 政治大 and by other effects that may influence the accruals anomaly and securities mispricing, 立 To identify whether the finding is affected by time-specific unobservable factors. ‧ 國. 學. I perform regression-based analyses.. Table 5 shows the results for the treatment group and two control groups. For. ‧. cross-listed firms from mandatory IFRS countries (Panel A), the coefficient of the. sit. y. Nat. interactive term (R_DACC x PRE) is negative (-13.9%), and is marginal significant at. io. er. 10% level for one-tailed test. The sum of the R_DACC + R_DACC x PRE (Test 1). al. v i n C hMoreover, the difference (-15.7%). engchi U. n. measures the total effect of discretionary accruals over the pre-IFRS period and is significantly negative. of 13.9% indicates a. reduction of over 88.5% relative to the pre-IFRS period. These findings suggest that discretionary accruals predict significantly negative abnormal returns, which is mainly concentrated in the pre-IFRS period. Turning to the predictability of operating cash flows, the term R_OCF x PRE is insignificantly negative (6.8%), and the sum of R_OCF + R_OCF x PRE (Test 2) is also statistically insignificant (7.7%). In terms of control variables, market value yields significantly negative return predictability among cross-listers from IFRS and non-IFRS countries, and book-to-market ratio yields significantly positive return predictability among 23.

(29) cross-listers from non-IFRS countries and comparable U.S.-domiciled firms for cross-listers from IFRS countries. Therefore, the results that discretionary accruals predict significantly negative abnormal returns in the pre-IFRS period and that the return predictability becomes statistically insignificant in the post-IFRS period are consistent with H1. Despite of the difference in methodology from Table 4, the general findings in Table 5 also yield evidence supporting the prediction. It is also robust to the control of market value, book to market value, cash flow to price ratio, and residual variance. In other words, the finding is not subsumed by value/growth. 政治大 Panel B examines the return predictability for cross-listers from non-IFRS 立. effect and limits to arbitrage.. adoption countries. The incremental effect of pre-IFRS period on the negative. ‧ 國. 學. predictability of discretionary accruals, R_DACC x PRE is also marginal at 10% level. ‧. for one-tailed test (-18.0%), suggesting a more pronounced return predictability in the. sit. y. Nat. pre-IFRS period. However, the sum of R_DACC + R_DACC x PRE is insignificant at. io. er. 10% level for two-tailed t-test (-10.7%). Turning to the return predictability of operating cash flows, R_OCF x PRE is significantly negative (-22.5%), while the sum. n. al. Ch. of R_OCF + R_OCF x PRE is significantly. engchi. v i n positive U (22.5%).. Thus, among. cross-listers from non-IFRS adoption countries, evidence of discretionary accruals predicting negative abnormal returns in the pre-IFRS period is not as pronounced as that among cross-listers from IFRS countries. As for matched U.S.-domiciled firms for the cross-listers from mandatory IFRS adoption countries, R_DACC x PRE is insignificant (-16.3%) and the total return predictability effect of discretionary accruals is also insignificantly negative in the pre-IFRS period (-2.3%). The return predictability of operating cash flows, R_OCF x PRE is insignificant (-6.1%), and the sum of R_OCF + R_OCF x PRE shows significantly positive results (16.1%). Thus, from the pre- or the post-IFRS period, the 24.

(30) U.S.-domiciled firms did not experience a significant difference in the negative return predictability of discretionary accruals. Combining the evidence collected from Table 5, I can draw the inference that among cross-listers from IFRS countries, decreases in the negative return predictability of discretionary accruals are attributed to change in accounting standards, and that the findings in Panels B and C help mitigate the possibility that the results consistent with the prediction are due to some unidentified confounding effects unrelated to mandatory IFRS adoption. Table 5 Regression-based tests. 政治大. This table reports the coefficient (p-value) of the following equation: 𝑆𝐴𝑅𝐸𝑇𝑖,𝑡+1 = 𝛾0 +. 立. 𝛾1 𝑅_𝐷𝐴𝐶𝐶𝑖,𝑡 + 𝛾2 𝑃𝑅𝐸𝑖,𝑡 + 𝛾3 𝑅_𝐷𝐴𝐶𝐶𝑖,𝑡 × 𝑃𝑅𝐸𝑖,𝑡 + 𝛾4 𝑅_𝑂𝐶𝐹𝑖,𝑡 × 𝑃𝑅𝐸𝑖,𝑡 + 𝛾5 𝑅_𝑂𝐶𝐹𝑖,𝑡 + 𝛾6 𝑀𝑉𝑖,𝑡 + 𝛾7 𝐵𝑀𝑖,𝑡 + 𝛾8 𝐶𝑃𝑖,𝑡 + 𝛾9 𝑅𝑉𝐴𝑅𝑖,𝑡 + 𝜀𝑖,𝑡 . 𝑆𝐴𝑅𝐸𝑇𝑖,𝑡+1 is the annual size-adjusted return calculated as. ‧ 國. 學. the raw buy-and-hold returns of each firm minus the returns of matched portfolio to which each firm is assigned, 𝐷𝐴𝐶𝐶𝑖,𝑡 is discretionary accruals estimated from the modified Jones (1991) model. ‧. following Kothari et al. (2005), 𝑂𝐶𝐹𝑖,𝑡 is operating cash flow divided by total assets, R_DACC and R_OCF are the annual decile rank of discretionary accruals and operating cash flow, scaled to range. y. Nat. from 0 to 1, 𝑃𝑅𝐸𝑖,𝑡 is a dummy variable assigned to 1 for pre-IFRS period, , 𝑀𝑉𝑖,𝑡 is the log of. sit. market value, 𝐵𝑀𝑖,𝑡 is the book-to-market ratio, 𝐶𝑃𝑖,𝑡 is the cash flow-to-price ratio, and 𝑅𝑉𝐴𝑅𝑖,𝑡. al. er. io. is the residual variance estimated from the Fama and French (1996) three-factor model. The analyses. v. n. are conducted separately in cross-listed firms from mandatory IFRS countries (Panel A), cross-listed. Ch. i n U. firms from non-IFRS adoption countries (Panel B), and comparable U.S.-domiciled firms for. engchi. cross-listers from IFRS countries (Panel C). The p-values are two-tailed.. Intercept R_DACC R_OCF. Panel A: Cross-listers from mandatory IFRS countries. Panel B: Cross-listers from non-IFRS adoption countries. Panel C: Matched U.S.-domiciled firms. 0.239. -0.045. -0.216. (0.1931). (0.7580). (0.1307). -0.018. 0.073. 0.140. (0.7958). (0.4632). (0.1264). 0.144. 0.449. 0.222. (0.1545). (<.0001). (0.0201). 25.

(31) Table 5 (continued) PRE R_DACC x PRE R_OCF x PRE MV BM CP. 0.044. 0.140. 0.160. (0.7039). (0.1318). (0.0775). -0.139. -0.180. -0.163. (0.1613). (0.1400). (0.1925). -0.068. -0.225. -0.061. (0.6570). (0.0713). (0.6081). -0.031. -0.043. -0.014. (0.0203). (0.0001). (0.2818). 0.135. 0.335. 0.320. (0.2800). (0.0074). (0.0004). 0.000. -0.000. -0.000. 政治(0.5208)大 0.103. (0.1967) 1.279 立 (0.5810). 1.861. (0.9149). Adjusted R (%). 2.57. 11.59. Observations (firm-year). 859. 846. (0.1798). 學. 2. ‧ 國. RVAR. (0.3867). 859. ‧. Test 1 R_DACC + R_DACC x PRE = 0 -0.107 (0.1146). io. n. al. -0.023 (0.7770). er. Test 2 R_OCF + R_OCF x PRE = 0 Coefficient 0.077 (p-value) (0.4577). y. -0.157 (0.0247). sit. Nat. Coefficient (p-value). 9.13. i n Ch U i e n g c h0.225 (0.0141). 26. v. 0.161 (0.0412).

(32) 7. Conclusion I examine the impact of mandatory IFRS adoption on the accruals anomaly for firms cross-listed in the U.S. I build on the evidence from prior research that IFRS improved the information environment and predict that the accruals mispricing should be reduced among cross-listers from IFRS adopted countries following the adoption. The evidence shows that foreign firms from IFRS countries cross-listed in the U.S. experience a significant decrease in the accruals anomaly, implying that the information environment of these firms has improved, which enables investors to. 政治大 mispricing of discretionary立 accruals among cross-listers from non-IFRS countries and. value accruals more accurately. Moreover, I find no significant reductions in the. ‧ 國. 學. among comparable U.S.-domiciled firms. These results help mitigate the possibility that the findings consistent with the prediction are caused by unidentified. ‧. macroeconomic effects.. sit. y. Nat. This study provides three implications. First of all, the mandatory IFRS adoption. n. al. er. io. benefits not only firms in the domestic markets, as documented in the existed. i n U. v. literature, but also those cross-listed in foreign markets. Second, regardless of whether. Ch. engchi. the U.S. eventually adopts IFRS, the mandatory IFRS adoption elsewhere can still benefit U.S. investors by offering accounting information with improved quality and reducing their information disadvantages. Finally, the findings have implication for the debate that whether the improvements in financial reporting quality are driven by incentives or standards. Evidence that among cross-listers from IFRS countries, the accruals anomaly is significantly reduced following IFRS adoption adds evidence in support of accounting standards.. 27.

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