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

91 NTU Management Review Vol. 30 No. 2 Aug. 2020 sample to these firms because firms adopting IFRS no longer have to provide reconciliations, and because application of IFRS by non-U.S. firms may results in quality of accounting data that are not comparable to those resulting from application of U.S. GAAP (see Barth et al., 2012; Lin et al., 2012). 12 We find that, during our sample period, 40 firms (83 firm-year observations) voluntarily changed their reporting standards to IFRS. Of these, 22 firms (33 firm-year observations) switched from domestic standards and 18 firms (50 firm-year observations) switched from U.S. GAAP. 13 On the contrary, only six firms switched from IFRS to U.S. GAAP. Additionally, to the extent that the SEC believes that U.S. GAAP provides better protection to investors than IFRS (as evidenced by the slow pace of convergence of the two standards), a significant number (45%) of these 40 firms converting to IFRS from U.S. GAAP seems to be an unintended consequence of the regulatory change. Panel A of Table 1 provides a breakdown of these sample firms by country. 14 Canada has the largest number of firms (19), while six countries, including Argentina, Channel Islands, China, Ireland, Korea, and Marshall Islands, have the lowest (one). Of the sample firms that switched to U.S. GAAP (IFRS) voluntarily from their local standards after the SEC waived the reconciliation requirement, the largest number is from Canada (Brazil and Mexico). 15 The sample distribution indicates that the number of unique firms vary across 12 Prior studies (e.g., Gunny, 2010; Roychowdhury, 2006; Zang, 2012) examine a setting where the manager is more likely to engage in earnings management. Specifically, they focus on firms that smooth earnings to meet various forms of earnings benchmarks (e.g., prior years’ earnings, zero earnings, analyst consensus forecast). Given that this paper is also intended to examine other competing theories of managerial opportunistic behavior (e.g., taking a “big bath”), we do not limit our sample to firms just beating/meeting these benchmarks. To mitigate the concern that our smoothing proxy is not picking up the intended reporting incentive effect, we further validate the SMOOTH it variable by examining alternative thresholds, which incorporate various forms of benchmark beating, later in the additional analyses section. 13 Out of the voluntary IFRS adopters, the only non-U.S. firm required to use U.S. GAAP by its home jurisdiction is domiciled in Marshall Islands. Accordingly, we include this firm in the sample group that switched from local GAAP to IFRS. 14 The country-level sample distribution as shown in Panel A of Table 1 reveals that firms in countries such as Australia, Ireland, and the U.K. are required to adopt IFRS since 2005, but they voluntarily switched to U.S. GAAP after SEC’s decision to eliminate the reconciliation requirement. Accordingly, we assert that the filing choice of these voluntary adopters is attributable to the elimination. 15 The use of IFRS became a requirement for Canadian public firms for financial years beginning on or after January 1, 2011. However, U.S. GAAP continues to be acceptable for U.S.-listed Canadian firms. Of the firms that switched to U.S. GAAP voluntarily from Canadian GAAP after the reconciliation elimination, we find that only one firm adopted IFRS in 2011.