The adoption of international financial reporting standards (IFRS) and loss avoidance in turkey
Accounting in Central and Eastern Europe
ISBN: 978-1-78190-938-6, eISBN: 978-1-78190-939-3
Publication date: 27 January 2014
Abstract
Purpose
The purpose of the study is to present evidence on the International Financial Reporting Standards (IFRS) adoption and earnings quality relationship on an emerging country context focusing on firm characteristics.
Design/methodology/approach
To measure loss avoidance, the earnings distribution approach is followed. Data includes all the nonfinancial firms listed on the Borsa İstanbul (BIST) for the period covering 1998–2010. The sample is divided into subsegments according to size and leverage, considering the potential impact of different financial reporting incentives. Furthermore, mandatory and voluntary adopters are examined separately.
Findings
The results indicate lower loss aversion in the post-IFRS period. Furthermore, we found that incentives dominate accounting standards in determining financial reporting quality. The decrease in loss aversion after IFRS adoption is more significant for large firms compared to small firms, low leverage firms compared to high leverage firms, and for mandatory IFRS adopter firms compared to voluntary IFRS adopters.
Originality/Value
Research provides inconsistent evidence on the relationship between IFRS adoption and earnings quality. Turkey represents an interesting environment to test the impact of IFRS adoption, as the Turkish accounting system has followed a historical path from a Continental European accounting system to an Anglo-Saxon accounting system. The current Turkish accounting system exhibits features of both these systems. Additionally, IFRS adoption was optional in 2003 and mandatory in 2005 in line with EU regulations, and the changes in the reporting environment are supported by the regulatory developments and institutional changes in Turkey.
Keywords
Acknowledgements
Acknowledgments
We would like to express our gratitude toward the editors of the book, Cătălin Nicolae Albu and Răzvan V. Mustaţă for their support and encouragement during the process, and to anonymous referees for their valuable suggestions and insight which helped us in completion of this chapter.
Citation
Varan, S. and Balsari, C.K. (2014), "The adoption of international financial reporting standards (IFRS) and loss avoidance in turkey", Accounting in Central and Eastern Europe (Research in Accounting in Emerging Economies, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 1-25. https://doi.org/10.1108/S1479-3563(2013)0000013006
Publisher
:Emerald Group Publishing Limited
Copyright © 2013 Emerald Group Publishing Limited