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Accounting standards convergence dynamics: International evidence from club convergence and clustering

Nicholas Apergis (Department of Banking and Financial Management, University of Piraeus, Piraeus, Greece)
Christina Christou (Department of Banking and Financial Management, University of Piraeus, Piraeus, Greece)
Christis Hassapis (Department of Economics, University of Cyprus, Nicosia, Cyprus)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 28 October 2014

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Abstract

Purpose

This paper aims to explore convergence of accounting standards across worldwide adopted measures to investigate whether countries that have not completely adopted International Accounting Standards across the globe have displayed a tendency to act so.

Design/methodology/approach

The new panel convergence methodology, developed by Phillips and Sul (2007), is employed.

Findings

The empirical findings suggest that countries form distinct convergent clubs, albeit on a limited prevalence, yielding support to the notion that on a global basis firms and countries have initiated processes that will eventually lead them to a uniform pattern of employing common accounting standards.

Practical implications

These findings have substantial implications on a firm level, mainly for differences in accounting quality as well as for differences in their cost of capital, thus leading the regulatory authorities to opt for further improvements in financial reporting.

Originality/value

The novelties of this paper first, stem from the fact that it is the first time in the relevant literature that an empirical study attempts to formally measure whether the accounting world exhibits a tendency for accounting standards convergence or whether tactics and policies remain stagnant, acquiring drastic policy measures to speed up the convergence process. In addition, this study employs the implementation of the new methodology of panel convergence testing. This methodology has several appealing characteristics.

Keywords

Acknowledgements

The authors highly appreciate two referees of this journal for their constructive comments that enhanced the quality of this study. The authors also appreciate Donggyu Sul for making the Gauss code available to them. A sample code can be downloaded from Donggyu Sul’s homepage: http://homes.eco.auckland.ac.nz/dsul013/. The authors also express our gratitude to Nicholas Koumbiadis and Robert Rikards for constructive comments that improve the first picture of this paper. The usual disclaimer applies.

Citation

Apergis, N., Christou, C. and Hassapis, C. (2014), "Accounting standards convergence dynamics: International evidence from club convergence and clustering", Accounting Research Journal, Vol. 27 No. 3, pp. 226-248. https://doi.org/10.1108/ARJ-06-2013-0031

Publisher

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Emerald Group Publishing Limited

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