Incentives or Standards: What Determine Accounting Quality Changes around IFRS adoption?

We document accounting quality improvements following voluntary IFRS adoption.However, we find no evidence of such improvements subsequent to mandatory adoptionby firms that resist IFRS adoption. We exploit a unique setting in Germany where firmscould voluntarily adopt IFRS before mandatory compliance in 2005. This setting enablesus to identify the incentives of firms based on their own assessments of net benefits fromIFRS adoption. We examine earnings management and timely loss recognition, which areoften used in contemporary research to assess accounting standard quality....