Using variation in book-tax conformity across EU countries, we provide new evidence on whether mandatory IFRS adoption leads to increases in earnings quality. Specifically, we examine if the relation between earnings quality and IFRS adoption differs among firms in countries with and without a...

Bagnoli and Watts (2005) propose that a manager could reduce information asymmetry by choosing an income-decreasing accounting choice that signals the firm's relatively good future prospects. A limitation in testing this theory is that most income-decreasing accounting choices over time reverse...