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New insights into IFRS and earnings quality: what conclusions to draw from the French experience?

Ramzi Benkraiem (Audencia Business School, Nantes, France)
Itidel Ben Saad (ISG, Université Gabes, Gabes, Tunisia)
Faten Lakhal (Research Center, Léonard de Vinci Pôle Universitaire, Paris La Défense, France) (IRG, Université Paris-Est, Créteil, France)

Journal of Applied Accounting Research

ISSN: 0967-5426

Article publication date: 4 January 2021

Issue publication date: 23 February 2021




The purpose of this study is to examine the effect of International Financial Reporting Standards (IFRS) on earnings quality in a continental European context (i.e. France) more than a decade after their mandatory adoption. Furthermore, the authors investigate whether the IFRS effect depends on firm-specific incentives.


The authors construct an aggregated measure that considers the main qualitative information characteristics: reliability and relevance. They identify accruals quality, earnings smoothing and the degree of conditional conservatism as attributes of reliability and use earnings persistence, predictability, value relevance and timeliness to measure earnings relevance. To test the hypotheses, the authors use a sample of French listed companies. The analyses are based on ordinary least squares (OLS) fixed effects, the Newey–West estimator and the difference-in-difference approach. The authors also use cluster analysis to identify firms with high incentives for earnings quality.


The results reveal a decrease in earnings quality that persisted for a decade after IFRS adoption. This decrease is mainly due to a decline in earnings relevance, suggesting that the fair value principle worsened earnings volatility. However, the results show that there is an improvement in earnings reliability after IFRS adoption, suggesting that the international standards were able to constrain managerial opportunism. Additionally, the findings reveal that firm-specific incentives can enhance the positive effect of IFRS, but the incentives are not able to substitute for such effect.

Research limitations/implications

The IFRS effect depends on firm-specific incentives.

Practical implications

The authors prove that firm-specific incentives are important to accentuate the positive effect of IFRS on earnings reliability and to mitigate the impact of IFRS on earnings relevance.


This paper makes several contributions to the literature. First, it addresses the relative lack of attention to the main qualitative characteristics in measuring earnings quality, that is, earnings reliability and earning relevance, and uses an aggregate earnings quality measure. Second, this paper uses a cluster analysis to highlight the role of firm-specific incentives in shaping the effect of IFRS on earnings quality.



Benkraiem, R., Ben Saad, I. and Lakhal, F. (2021), "New insights into IFRS and earnings quality: what conclusions to draw from the French experience?", Journal of Applied Accounting Research, Vol. 22 No. 2, pp. 307-333.



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