TAILIEUCHUNG - IAS VERSUS U.S. GAAP: INFORMATION ASYMMETRY-BASED EVIDENCE FROM GERMANY'S NEW MARKET

For countries with a tradition of reliance on laws and regulations (rather than standards) for the fixing of accounting and auditing requirements, specific issues arise. Rather than giving authority to a continuing process of standard-setting, new statutory measures are required whenever a new international standard is enacted, or an existing international standard is amended. Typically, such changes must be gazetted in the official language of the country. Such an approach can lead to delays in keeping the body of translated and gazetted IAS/IFRS up-to-date; this approach also entails significant costs and technical difficulties of carrying out translations. At the same. | Journal of Accounting Research Vol. 41 No. 3 June 2003 Printed in . IAS Versus . GAAP Information Asymmetry-Based Evidence from Germany s New Market CHRISTIAN LEUZ Received 3 October 2001 accepted 7 November 2002 ABSTRACT Motivated by the debate about globally uniform accounting standards this study investigates whether firms using . generally accepted accounting principles GAAP vis-a-vis international accounting standards IAS exhibit differences in several proxies for information asymmetry. It exploits a unique setting in which the two sets of standards are put on a level playing field. Firms trading in Germany s New Market must choose between IAS and . GAAP for financial reporting but face the same regulatory environment otherwise. Thus institutional factors such as listing requirements market microstructure and standards enforcement are held constant. In this setting differences in the bid-ask spread and share turnover between IAS and . GAAP firms are statistically insignificant and economically small. Subsequent analyses of University of Pennsylvania. I gratefully acknowledge helpful comments from Anne d Arcy George Benston Phil Berger Gus De Franco Robert Holthausen Peter Knutson Christian Laux S. P. Kothari Claudia Roder Robert Verrecchia and especially Ray Ball and the anonymous referee. This paper has benefited from presentations at the American Enterprise Institute University of California at Berkeley Columbia University Harvard University J. W. Goethe Universitat Frankfurt MIT University of Michigan Stanford University Tilburg University the EAA Meetings Munich and the EFA Meetings Barcelona . I would also like to thank Uwe Schweickert Deutsche Borse Peter Gomber Deutsche Borse Jorg Hueber KPMG Rainer Jager PWC and IBES for generously providing data for this study and Tobias Herwig for his excellent research assistance. I also gratefully acknowledge financial support by the Wharton Electronic Business Initiative WeBI . 445 Copyright .

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