La importancia del compromiso organizacional

According to the International Financial Reporting Standards Foundation (IFRS Foundation, 2010), its principal objectives are

 to develop a single set of high-quality, understandable, enforceable and globally accepted IFRS through its standard-setting body, the IASB;

 to promote the use and rigorous application of those standards;

 to take account of the financial reporting needs of emerging economies and small and medium-sized entities; and

 to bring about convergence of national accounting standards and IFRS to high-quality solutions.

The demand for harmonization may pressure companies to improve their financial reporting (Baiman and Verrecchia, 1996; Palea, 2007). Tighter accounting standards can help investors by reducing their cost of acquiring experts, which in turn can improve earnings quality (Barth et al., 1999).

Much research has been done on whether the quality of earnings reported in annual reports is affected by IAS/IFRS adoption and whether these standards can reduce the managers‟ incentives to engage in earnings management.

Ewert and Wagenhofer (2005) used a rational-expectations equilibrium model and found that the adoption of IAS/IFRS improves accounting quality and reduces the level of earnings management. Similar results have been provided by Barth et al. (2008), who examined whether the adoption of IAS/IFRS is connected with higher accounting quality. Using a sample of entities from 21 countries that adopted IAS/IFRS, they found that these entities reported lower earnings management. Similarly, Goncharov and Zimmerman (2006) found that in Germany the level of earnings management reduced after the adoption of IAS/IFRS, and Zhou et al. (2007) found that Chinese firms were more likely to smooth their earnings before than after the adoption of IAS/IFRS.

Ding et al. (2007) created a list of standards that did not exist under local accounting systems and a list of standards that existed but were different from those proposed by the IASB. They found that the absence of standards was negatively related to the equity market and positively related to the ownership concentration of each country: “the level of absence is higher in countries with a less developed equity market and with a higher ownership concentration” (Ding et al., 2007, p 31). In addition, they found that companies operating in countries with high absence of standards used more earnings management, and Greece had the highest absence of standards of any country.

Research by Lang et al. (2006) found that companies operating in countries that have weak investor protection experience higher levels of earnings management.

Aussenegg et al. (2008) found that countries that reported low earnings management before the adoption of IAS/IFRS (English legal origin countries and Northern European countries) experienced no change in the level of earnings management, whereas countries that reported a high level of earnings management experienced a decline in this level. In research done by Leuz et al. (2003), who investigated the level of earnings management in 31 countries, Greece was classified as one of two countries (Austria being the other one) with the highest levels of earnings management.

Several studies suggest that the different economic and institutional factors existing in each country may affect managers‟ incentives and can determine the quality of the information provided in the financial statements of the company. According to Ball et al. (2000), code-law countries and common-law countries have different demands for accounting income. Code-law countries are characterized by weak investor protection, and the companies are financed mostly by banks and their government. On the other hand, the capital markets of common-law countries are more active and are characterized by strong investor protection (the information provided is investor- oriented) (Van Tendeloo and Vanstraelen, 2005). Accounting information aims to meet other needs, including elimination of political costs, determination of income tax and dividend payments. According to Leuz et al. (2003), earnings management is more predominant in code-law countries than in common-law countries. The advantages of earnings management, such as liquidity, tend to surpass the costs, in particular in countries with weak investor protection rights. The adoption of IAS/IFRS by a company leads to less earnings management because after the adoption of IAS/IFRS, the company has more incentives to report useful information for investors compared with a non-adopter.

The present thesis examines the effect of the adoption of IAS/IFRS on earnings management in Greece, which, according to La Porta et al. (2000), has low investor protection rights.

Most of the abovementioned studies imply that the adoption of IAS/IFRS had a beneficial impact on accounting quality; in particular, countries that used an accounting system that differed greatly from IASB standards increased their accounting quality significantly, as shown by lower earnings management. Additionally, as mentioned in

Section 2.4.3, the transition to IAS/IFRS is expected to have reduced the use of creative accounting in the Greek market and, therefore, reduced earnings management. As an example, in contrast to the Greek GAAP, under which any changes in the inventories‟ value are disclosed in the notes but not recognized, according to the fundamental principle of IAS 2, “inventories are required to be stated at the lower of cost and net realisable value” and any changes in the inventories‟ value should be recognized (see Section 2.7.2).

As mentioned in Section 2.7, some of the basic differences between the Greek GAAP and IAS/IFRS, such as depreciation of tangible assets, inventory valuation, amortization of goodwill, revaluation of fixed tangible assets and deferred taxation, are expected to have affected the reported earnings disclosed in the annual reports of the Greek companies.

Additionally, under IAS 19, all companies should recognize the cost of providing employee benefits in the period in which the benefit is earned by an employee, rather than when it is paid or payable (IAS PLUS, Deloitte, 2012b). On the other hand, under Greek GAAP, companies could recognize employee benefits only for the employees that were due to retire in the following financial year, which allowed them to report higher shareholders‟ equity. Moreover, not many disclosures were required. This means that Greek companies did not have to recognize their liabilities explicitly. As mentioned above, the introduction of IAS 19 required all companies to recognize defined benefit liabilities for all their employees. Thus, the adoption of IAS 19 is expected to have increased the net income because the necessary adjustments are expected to have increased the liabilities: an increase in a liability account is added back to net income (Epstein and Jermakowicz, 2007).

In addition, IAS 37 required the recognition of provisions as well as contingent liabilities and contingent assets by setting specific criteria for the identification of each of them. On the other hand, as mentioned in Section 2.4.3, Greek companies could be subjective on which provisions they recognized and disclosed within their annual reports. In particular, the differentiation between contingent liabilities and provisions was not clear under Greek law. Under Greek GAAP, there was no identification of any recognition criteria for liabilities; the GAAP simply required Greek firms to recognize liabilities for any definable risk. This means that Greek companies could decide

whether or not they recognized provisions. Thus, after the adoption of IAS/IFRS, Greek companies were not able to be subjective and were required to recognize all provisions. This is expected to have increased net income because an increase in a liability account is added back to the net income (Epstein and Jermakowicz, 2007).

To conclude, Greece is a code-law country with high levels of earnings management, and those Greek companies that reported under IAS/IFRS are expected to have had more incentives to report useful information for investors than those reporting under Greek GAAP. Additionally, the introduction of specific standards (e.g. IAS 2 and IAS 37) posed requirements that gave no Greek companies the opportunity to manage their earnings at the level they used to manage them. Therefore, the following can be hypothesized:

H1: The adoption of IAS/IFRS lowered earnings management in Greece.