We provide evidence on the preliminary effects of mandatory adoption of International Financial Reporting Standards (IFRS) on accounting quality for a relatively broad set of firms from 20 countries that adopted IFRS in 2005 relative to a benchmark group of firms from countries that did not adopt IFRS matched on the strength of legal enforcement, industry, size, book-to-market, and accounting performance. Relative to these benchmark firms, we find that IFRS firms exhibit significant increases in income smoothing and aggressive reporting of accruals, and a significant decrease in timeliness of loss recognition; however we do not find significant differences across IFRS and benchmark firms in meeting or beating earnings targets. Our findings contrast with findings in earlier studies which suggest that IFRS adoption leads to increased accounting quality. Our findings primarily hold for firms in strong enforcement countries, which suggests that enforcement mechanisms in these countries were not able to counter the initial effects of greater flexibility in IFRS relative to domestic GAAP.

Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence

We provide evidence on the preliminary effects of mandatory adoption of International Financial Reporting Standards (IFRS) on accounting quality for a relatively broad set of firms from 20 countries that adopted IFRS in 2005 relative to a benchmark group of firms from countries that did not adopt IFRS matched on the strength of legal enforcement, industry, size, book-to-market, and accounting performance. Relative to these benchmark firms, we find that IFRS firms exhibit significant increases in income smoothing and aggressive reporting of accruals, and a significant decrease in timeliness of loss recognition; however we do not find significant differences across IFRS and benchmark firms in meeting or beating earnings targets. Our findings contrast with findings in earlier studies which suggest that IFRS adoption leads to increased accounting quality. Our findings primarily hold for firms in strong enforcement countries which suggests that enforcement mechanisms in these countries were not able to counter the initial effects of greater flexibility in IFRS relative to domestic GAAP.

Does Mandatory Adoption of IFRS improve Accounting Quality? Preliminary Evidence

Prior to SFAS 142, goodwill was subject to periodic amortization and a recoverability-based impairment test. SFAS 142 eliminates periodic amortization and imposes a fair-value-based impairment test. We examine the impact of this standard on the accounting for and valuation of goodwill. Our results indicate that the new standard has resulted in relatively inflated goodwill balances and untimely impairments. We also find that investors do not appear to fully anticipate the untimely nature of post-SFAS 142 goodwill impairments. Overall, our results suggest that, in practice, some managers have exploited the discretion afforded by SFAS 142 to delay goodwill impairments, thus temporarily inflating earnings and stock prices.

Has goodwill accounting gone bad

We establish that the root cause of many goodwill write-offs is the buyers' overpriced shares at acquisition. Overpriced shares provide managers with strong incentives to exploit the overpricing by acquiring businesses, often paying more than the acquisition's synergies, setting the stage for subsequent goodwill write-offs. In particular, we document the following patterns: (1) Share overpricing is strongly and positively associated with the intensity of corporate acquisitions and the growth of accounting goodwill. (2) Share overpricing predicts goodwill write-offs and their magnitude. (3) Acquisitions by overpriced companies—a strategy often recommended by investment bankers and some academics—are often ill-advised (overpaid for and/or strategic misfit), exacerbating the post-acquisition negative returns of buyers beyond the reversal of the overpricing. Thus, managers' arguments notwithstanding, goodwill write-off is an important event highlighting a dysfunctional investment strategy. Data Avai...

http://people.stern.nyu.edu/blev/accfin/Overpriced%20Shares,%20Ill-Advised%20Acquisitions,%20and%20Goodwill%20Impairment.pdf

Overpriced Shares, Ill-Advised Acquisitions, and Goodwill Impairment

We hypothesize that the root cause of many goodwill write-offs - managers' public admission of ill-advised corporate acquisitions - is the overpriced shares of buyers at acquisition. Overpriced shares provide managers with strong incentives to invest, and particularly to acquire businesses, even at excessive prices and doubtful strategic fit, in order to buy themselves out of the overpriced share predicament and postpone the inevitable price correction by portraying continued growth. We corroborate our hypothesis by documenting: (1) share overpricing is strongly and positively associated with the intensity of corporate acquisitions, (2) share overpricing is negatively related to the post-acquisition share performance of buyers, beyond the price correction, indicating a negative relation between overpricing and the quality of acquisitions, (3) share overpricing is positively related to the size of goodwill write-offs. We further show that share overpricing predicts both goodwill write-offs and their magnitude, and that acquisition by overpriced companies is a losing proposition for shareholders. Finally, we document some of the serious private and social consequences of the ill-advised acquisitions made by overpriced firms. These findings contribute to the accounting literature on business combinations and goodwill, as well as to the finance/economics research on investor sentiments and corporate investment.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1259247_code62791.pdf?abstractid=1130940&mirid=1&type=2

The paper examines the reaction of market participants to the announcement of a goodwill impairment loss, the nature of the information conveyed by the loss, and whether a cause of goodwill impairment can be traced back to overpayment for targets at the time of prior acquisitions. Our evidence suggests that both investors and financial analysts revise their expectations downward on the announcement of an impairment loss. We find that the negative impact of the loss is significant under different reporting regimes, that is, pre-SFAS-142, transition period and post-SFAS-142, though it is lower in the post period. We further show that goodwill impairment serves as a leading indicator of a decline in future profitability. Our tests also reveal that proxies for overpayment for targets can predict the subsequent goodwill impairment. Indirect evidence suggests that firms with potentially impaired goodwill that did not report an impairment loss may have used their managerial discretion to avoid taking the loss.

Causes and consequences of goodwill impairment losses

Has pilot zones policy for green finance reform and innovations improved the level of green financial development and environmental quality?

Study on the special resistance characteristics of fly ash

This paper investigates the importance of studying the financial crisis in 2008, especially under current situation of COVID-19 and Ukraine Conflict. The three primary factors that contributed to the financial crisis in 2008 were the Fed's monetary policy, the credit default swaps, the crisis of subprime mortgage crisis. The Fed’s monetary policy was loosen and then the subprime mortgages were induced, which in turn caused the credit default swaps lending to the collapse of the financial system worldwide. There were several severe consequences caused by the financial crisis, including the sharp fall in GDP of both developed and developing countries, breakdown of banks, especially the collapse of Lehman Brothers, decrease in unemployment and the rise of household risk. In order to recover from this crisis, several changes has been proposed, implemented and revised, including the Dobb-Frank Act and Basel III. Overall, the importance of studying and understanding the financial crisis has been addressed effectively in this article in order to better the existing financial system and learn from history.

/pdf/unraveling-the-subprime-crisis-1dhje8ly.pdf

Unraveling the Subprime Crisis

Large-scale air pollution has an impact on the health and travel of residents in China. First, this article uses the gravity model and finds that China’s air quality presents a typical spatial correlation network. The network structure has changed from complex to simple, indicating that China’s air quality is gradually improving. Second, this paper uses spatial simultaneous equations to study the effect of air quality on residents’ health. The results show that an increase in the air quality index of local and surrounding provinces will have a significant impact on the health of residents. The absolute and relative air quality affects the lives of residents. The decline in the health of residents from the previous period will prompt the government to adopt various pollution reduction policies, which will improve air quality in the current period. Based on the empirical research conclusions, this article makes policy recommendations.

/pdf/air-quality-and-residents-health-in-china-an-empirical-ulcqoene.pdf

Air Quality and Residents’ Health in China: An Empirical Analysis Based on Spatial Simultaneous Equations

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