Are Cross-Border Listed Firms’ IFRS-Based Financial Reports Comparable?

• In Event: 1. Financial Reporting Comparability

Abstract

Variations in enforcement of International Financial Reporting Standards (IFRS) across legal jurisdictions create skepticism about the degree of financial statement comparability (hereafter comparability) of cross-border-listed (CBL) firms. This study makes the case for testing whether the IFRS financial reports of CBL firms domiciled in different legal environments are comparable. We examine the effect of differences in jurisdictions’ legal enforcement on comparability. We assess comparability by using an output-based method on a sample of CBL firms domiciled in 42 countries. The results provide evidence of the absence of comparability in IFRS-based financial reports of differing legal environments. Test results also signal that differences in legal enforcement are negatively associated with comparability. We find evidence that CBL firms supplement country-level deficiencies of mandatory regulatory enforcement by voluntary firm-level structures (e.g. choice of auditor service).

Authors

• Ho-Tan-Phat Phan, University G. d'Annunzio of Chieti-Pescara

• Francesco De Luca, University G. d'Annunzio of Chieti-Pescara

• Jenice J Prather-Kinsey, University of Alabama at Birmingham