INVESTMENT DECISION RISK ANALYSIS: PRELIMINARY EVIDENCE OF THE IMPACT OF ACCOUNTING RULES’ CONVERGENCE

Gary G. Johnson
Zheng Wu
Anthony Varnon
Southeast Missouri State University

ABSTRACT

This study evaluates the extent to which investment decision risk is impacted when financial information is reported under International Financial Reporting Standards (IFRS) as operationalized in China, Japan, Germany, and France, and the same information as reported under U.S. Generally Accepted Accounting Principles (GAAP). Using financial statements from 50 companies headquartered in the world’s most productive economies, this study concludes that there are no significant differences in leading investment analysis ratios when determined under different accounting rules. High convergence of rules among the different accounting standards appears to account for the low levels of investment decision risk.

Keywords: Investment, risk analysis, accounting rules’ convergence