Adding Shareholder Value

Published on November 10, 2020

Bauer Assistant Professor Assesses Effectiveness of Financial Accounting Standards Board

Assistant Professor of Accounting Bin Li

Assistant Professor of Accounting Bin Li, who joined the C. T. Bauer College of Business this year, co-authored a 2018 award-winning research paper that was widely discussed in his field when it was published in The Accounting Review.

“Do the FASB’s Standards Add Shareholder Value?” was the first academic paper to undertake a comprehensive assessment of the impact of FASB standards over the more than quarter century since the Financial Accounting Standards Board began operation.

In the midst of ongoing debate about the effectiveness of the FASB’s accounting standards, its findings provoked discussion about a controversial topic.

A forthcoming paper in Contemporary Accounting Research continues to examine the effectiveness of another accounting standard setter, the International Accounting Standards Board (IASB), as well as how mandatory and voluntary accounting disclosures affect investor decisions and firm value.

“Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality,” explores the relationship between the disclosure channel and economic consequences for firms that adopted International Financial Reporting Standards (IFRS) in 2005.

Li and his co-authors Mohan Venkatachalam of Duke University and Gianfranco Siciliano from China Europe International Business School, find that adopting IFRS does increase the details and granularity of financial statements and a firm’s stock liquidity. But the cost associated with adopting IFRS appears homogenous, with audit fees remaining similar whether a firm provides more granular information in financial statements or not, Li said.

“Our evidence suggests that the cost-benefit trade-offs not only vary across IFRS-adopting countries but also vary across IFRS-adopting firms within a country,” he added.

“Therefore, the cost-benefit trade-off of IFRS adoption is neither uniform across all IFRS-adopting countries nor across IFRS-adopters within each country.”

Li previously was an Assistant Professor of Accounting at the University of Texas at Dallas and University of Oklahoma. While attending the Duke University doctoral program, he worked closely with his dissertation adviser, Professor Katherine Schipper, who served on FASB, sparking his interest in accounting standards.

Li has been honored with the AAA’s Notable Contributions to Accounting Literature Award. His 2018 paper was one of two Best Papers named that year by the Financial Accounting and Reporting (FARS) of the American Accounting Association (AAA). He graduated with a Ph.D. from Duke in 2012.

By Julie Bonnin