סמינר במימון חשבונאות

 Daphne Hart,  London School of Economics and Political Science

A common perception is that principles-based accounting standards allow for more managerial discretion over financial reporting, which suggests that IFRS adoption may alter the litigation risk exposure of companies and their directors and officers. To investigate the impact of adopting a more principles-based standard on litigation risk we investigate changes in Directors' and Officers' (D&O) liability insurance in Canada around the adoption of IFRS. We test for changes in D&O insurance premiums, coverage, and cost per unit of coverage across samples of firms listed domestically in Canada as well as those cross-listed in the United States. We also perform a difference-in-differences analysis using New York firms as a control group. Overall, we find evidence that more principles-based accounting standards reduce litigation risk and provide evidence for a real benefit of adopting more principles-based accounting standards.