Showing papers by "Mark H. Lang published in 2007"
Posted Content•
01 Jan 2007TL;DR: In this article, the authors examine whether the adoption of International Accounting Standards (IAS) is associated with higher accounting quality and find that firms applying IAS from 21 countries generally exhibit less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards.
Abstract: We examine whether application of International Accounting Standards is associated with higher accounting quality. The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the post-adoption differences. We also find that firms applying IAS generally evidence an improvement in accounting quality between the pre- and post-adoption periods. Although we cannot be sure that our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate the effects of both.
1,762 citations
TL;DR: In this paper, the authors examine whether the adoption of International Accounting Standards (IAS) is associated with higher accounting quality and find that firms applying IAS from 21 countries generally exhibit less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards.
Abstract: We examine whether application of International Accounting Standards is associated with higher accounting quality. The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the post-adoption differences. We also find that firms applying IAS generally evidence an improvement in accounting quality between the pre- and post-adoption periods. Although we cannot be sure that our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate the effects of both.
902 citations
TL;DR: The authors examined the relation between earnings smoothing, governance and liquidity for a sample of non-U.S. firms and found that firms with higher levels of discretionary smoothing experience lower liquidity as evidenced by greater frequency of zero returns days, lower trading volume and higher bid-ask spreads.
Abstract: We examine the relation between earnings smoothing, governance and liquidity for a sample of non-U.S. firms. We divide smoothing into innate and discretionary components, and find that discretionary smoothing is increasing in incentives to smooth (greater tax-book conformity, concentrated ownership, related party transactions and weak overall governance) and decreasing in oversight (investor protection, analyst following and ADR listing). Given the potential for smoothing to affect transparency, we examine the relation between smoothing and investors' willingness to transact in the stock as reflected in liquidity. After controlling for other liquidity determinants, we find that firms with greater levels of discretionary smoothing experience lower liquidity as evidenced by greater frequency of zero returns days, lower trading volume and higher bid-ask spreads. In contrast, results for innate smoothing suggest that innate smoothing is positively correlated with liquidity. Taken together, our results suggest that investors differentiate between innate and discretionary smoothing, and discretionary smoothing reduces their willingness to transact in the stock.
74 citations
TL;DR: In this article, the authors examine the determinants and consequences of the split of options between executive and nonexecutive employees and find that the lower the proportion of options granted to executives, the stronger firm governance is.
Abstract: We examine the determinants and consequences of the split of options between executive and nonexecutive employees. We find that the lower the proportion of options granted to executives is, the stronger firm governance is. For the sample as a whole, the relation between options and both operating income and valuation is weaker for executive options than for options to lower-level employees. Splitting the sample between weak and strong governance firms, for the weak (strong) governance firms, the relation between executive options and firm performance and valuation is weaker (stronger) relative to nonexecutive options. Results are robust to controls for the endogeneity of option-granting choice. Taken as a whole, our results suggest that firms with relatively weak governance tend to give a larger proportion of options to executives and appear to receive relatively less benefit from those options.
8 citations
Posted Content•
TL;DR: The authors examined whether application of International Accounting Standards is associated with higher accounting quality and found that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards.
Abstract: We examine whether application of International Accounting Standards is associated with higher accounting quality The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do a matched sample of firms applying non-US domestic standards Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the post-adoption differences We also find that firms applying IAS generally evidence an improvement in accounting quality between the pre- and post-adoption periods Although we cannot be sure that our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate the effects of both
1 citations