Does IFRS Convergence Affect Financial Reporting Quality in China?

Since 2007, all listed firms in China have been required to report under a new set of Chinese Accounting Standards, which is recognized by the International Accounting Standards Board (IASB) as having achieved ‘substantial convergence’ with IFRS.


This ACCA report, which covers all Chinese industrial companies listed on the Shanghai and Shenzhen stock exchanges, evaluates the effects of IFRS-converged CAS by comparing the value relevance of financial statements issued before and after 2007.
Key Findings:
  • There has been a significant increase in the value relevance of reported earnings for the firms in the treatment group following mandatory adoption of IFRS-converged CAS


  • The effect of IFRS-converged CAS for the treatment group is stronger for firms in the manufacturing sector


  • The effect of IFRS-converged CAS is greater among Chinese listed firms with foreign ownership


  • The impact of IFRS-converged CAS is significantly more pronounced among firms that receive less government subsidy



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