臺大管理論叢 NTU Management Review VOL.30 NO.2

The Effects of Relaxing the Reconciliation Requirement in Foreign Private Issuers’ SEC Filings on Earnings Management Strategies: IFRS Adopters versus U.S. GAAPAdopters 78 2. Literature Review and Hypotheses Development Prior studies that focus on the accounting differences between IFRS and U.S. GAAP can be classified into four groups. First are the papers investigating the information content of financial statements prepared under IFRS versus U.S. GAAP reconciliation requirements. Harris and Muller (1999) examine a sample of non-U.S. cross-listed firms, for example, and find that U.S. GAAP earnings reconciliation amounts are value-relevant, and that the U.S. GAAP earnings reconciliation adjustment is valued differently than earnings reported under International Accounting Standards (IAS), the predecessor of IFRS. Following Harris and Muller (1999), Henry, Lin, and Yang (2009) assess the differential market relevance of IFRS versus U.S. GAAP financial statements for EU cross-listed firms and document significant differences between results under the two standards. Chen and Sami (2008) also investigate cross-listed IAS filers and find a positive association between abnormal trading volume and the earnings reconciliation adjustment in the two-day window surrounding the release of the reconciliation. Using more recent data, Gordon, Jorgensen, and Linthicum (2011) document that U.S. GAAP- reconciled earnings are incrementally value-relevant. Similar to Chen and Sami (2008), Byard et al. (2017) use abnormal trading volume to capture the information content of earnings announcements and find that the reconciliation elimination deteriorates investors’ perception of the degree of comparability between IFRS-reporting foreign firms and comparable U.S. firms. Overall, these findings suggest that investors rely on reconciliation information and perceive differences in U.S. GAAP reconciliation and IFRS amounts. However, reconciling financial statements from local standards to U.S. GAAP is different than a comprehensive application of U.S. GAAP. Therefore, inferences drawn from these studies may not truly reflect the relative differences in the information content of financial statements prepared under IFRS versus U.S. GAAP. The second group includes studies that examine differences in IFRS and U.S. GAAP in settings where firms can choose from among multiple accounting standards. Using a sample of German firms that were allowed to choose German GAAP, U.S. GAAP, and IAS, for example, Bartov et al. (2005) find a stronger relationship between earnings and returns for IAS and U.S. GAAP over German GAAP, but they are unable to document any significant differences in the earnings/returns association between IAS and U.S. GAAP. Similarly, Van der Meulen, Gaeremynck, and Willekens (2007) find that U.S. GAAP is not superior to IFRS in terms of value relevance for a sample of German firms. Also, Leuz (2003) documents that information asymmetry and market liquidity are similar across IAS