The influence of reporting standards and inter-firm relationships on financial reporting

P.Y.E. Leung

Research output: ThesisDoctoral Thesis

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Accounting information is vital for many aspects in business and numerous parties rely on reported information for a variety of purposes. Understanding how factors in a firm’s environment, such as standard setting, inter-firm relationships, managerial incentives and capital providers, influence the quality of this information is therefore crucial. This thesis focuses on two such factors, namely international financial reporting standards (IFRS) and inter-firm relationships. Chapter 2 examines the stock market reaction to 15 events relating to IFRS adoption in the United States. The goal is to assess whether investors perceive the switch to IFRS as beneficial or costly. The findings show that investors’ reaction to IFRS adoption is more positive in cases where IFRS is expected to lead to convergence benefits and that the effect of IFRS depends on a firm’s relationship with and similarity to other firms in its industry. Chapter 3 studies whether changes within IFRS, namely adopting the heavily debated new segment reporting standard IFRS 8, led to increases in segment reporting quality. The results of this study demonstrate predictable cross-sectional heterogeneity in the effects of IFRS 8 and that IFRS 8 does not lead to a general improvement in segment disclosures for all firms. However, we also do not find that firms that improve their segment disclosures experience positive capital market effects such as greater liquidity. Overall, these findings call into question whether introducing IFRS 8 improved segment disclosures. Chapter 4 focuses on inter-firm relationships and studies whether characteristics of a firm’s relationships with suppliers influence the disclosure of forward-looking information. Uncertainty about a buyers’ future performance can limit a supplier’s willingness to invest in relationship-specific assets. In such situations, a buyer may use disclosures to reliably inform suppliers about its prospects and increase a supplier’s willingness to invest. I find a positive association between the importance of relationship-specific investments in supplier industries and the likelihood a buyer discloses forward-looking information. I also find that this relationship is more pronounced when suppliers are more powerful and the cost of disclosing this information is low. Overall, the findings suggest that financial reporting can play an important role in inter-firm relationships.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
  • Joos, Philip, Promotor
Award date13 Sept 2013
Place of PublicationTilburg
Print ISBNs9789056683610
Publication statusPublished - 2013


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