Do higher levels of the enforcement of accounting standards improve investment efficiency? Evidence from IFRS-adopting countries
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Thursday 25 November 2021
02:00 PM - 03:30 PM
We will discuss the impact of differential levels of the enforcement of accounting standards on a particular firm outcome - investment efficiency.
The purpose of the study to be presented is to investigate the impact of differential levels of the enforcement of accounting standards on a particular firm outcome - investment efficiency. We investigate this impact using a sample of listed firms from countries that use IFRS. We find strong evidence that the higher the level of enforcement of accounting standards, the higher the level of investment efficiency. Specifically, higher levels of the enforcement of accounting standards result in lower investment-cash flow sensitivities, and a higher sensitivity of investment to growth opportunities. We also find that higher levels of the enforcement of accounting standards reduce both underinvestment and overinvestment problems.
Andrew Stark is Emeritus Professor at the Alliance Manchester Business School. He was given the British Accounting Association Distinguished Academic Award in 2003 and was made a Fellow of the Academy of Social Sciences in 2014. He is currently one of the senior editors of the Journal of Business Finance and Accounting and is a past joint-editor of The British Accounting Review. He is a past chairperson of the British Accounting Association.