Harmonized Accounting Standards and Investment Beauty Contests

• 成果类型: Article
• 署名作者: Jiang, Xu; Tang, Chao; Zhang, Gaoqing
• 署名单位: Duke University; Hong Kong University of Science & Technology; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0232
• 发表日期: 2023
• 页码: 377-404
• 关键词: MANDATORY IFRS ADOPTION; Disclosure regulation; social value; economic consequences; voluntary adoption; potential adoption; positive theory; INFORMATION; earnings; FIRMS

摘要

We study the economic impacts of adopting harmonized accounting standards when firms' investments exhibit beauty contest features. We model harmonized accounting standards as common/correlated noises in firms' accounting reports. We show that while more harmonized accounting standards have ambiguous effects on the reports' informativeness in representing firms' underlying fundamentals, they always reduce their usefulness in forecasting aggregate investments. Therefore, the stronger the beauty contest features, the more important the forecasts about the aggregate investment, thus calling for less harmonized accounting standards. We also find that, absent beauty contest features, mandatory adoption of harmonized accounting standards can be unnecessary; however, such a mandate is warranted when beauty contest features are strong as firms, when left on their own, would not voluntarily do so. Taken together, our results provide both a justification for and identification of an unintended consequence of the recent mandates toward adopting harmonized accounting standards.