Jurnal Pengurusan 39(2013) 93 - 109 International Financial Reporting Standards and Financial Information Quality: Principles versus Rules-based Standards (Piawaian Pelaporan Kewangan Antarabangsa dan Kualiti Maklumat Kewangan: Perbandingan Antara Piawaian Berasaskan Prinsip dan Berasaskan Peraturan) Seyed Sajad Ebrahimi Rad Zaini Embong (Faculty of Economics and Management, Universiti Kebangsaan Malaysia) ABSTRACT The objective of the present study is to examine whether the adoption of International Financial Reporting Standards (IFRS) increases fnancial information quality. The IFRS brings about substantial changes in accounting standards. One of the prominent features of the system is that it results in the production of fnancial information of higher quality. Most extant studies in this area are performed at frm-level. The present study, on the other hand, examines the impact of IFRS adoption at the country-level. Environmental determinism theory states that accounting is a function of environmental variables, such as ownership structure, information environment and capital market condition. Therefore, the impact of IFRS adoption could be different across different countries. The present study addresses the existing lack of research that compares the outcomes of IFRS adoption between countries. Besides comparing the quality of fnancial information before and after the adoption of IFRS, the present study also compares the effects of IFRS adoption between countries with different accounting bases prior to the adoption. The results show that fnancial information quality, measured by fve indicators, improves after IFRS adoption; and that the impact is more prevalent in a rules-based country compared to a principles-based country. Keywords: IFRS; information quality; Malaysia; the Philippines ABSTRAK Matlamat kajian ini adalah untuk melihat sama ada penggunaan International Financial Reporting standards (IFRS) dapat meningkatkan kualiti maklumat kewangan. Terdapat perubahan ketara terhadap piawaian perakaunan berikutan peralihan kepada IFRS. Antara ciri IFRS yang sering diketengahkan adalah ia memungkinkan penghasilan maklumat kewangan yang lebih tinggi kualitinya. Berbeza dengan kajian lepas yang melihat kesan IFRS pada peringkat frma, kajian ini mengkaji kesan IFRS di peringkat negara. Menurut teori penetapan persekitaran, perakaunan dipengaruhi oleh faktor persekitaran seperti struktur pemilikan, persekitaran maklumat dan keadaan pasaran modal. Berdasarkan teori ini, kesan peralihan kepada IFRS mungkin berbeza antara negara. Kekurangan kajian lepas yang mengkaji di peringkat negara mendorong kajian ini untuk dijalankan. Di samping melihat perbezaan dalam kualiti maklumat kewangan sebelum dan selepas penggunaan IFRS, kajian ini turut meneliti dan membandingkan kesannya antara dua buah negara yang mengguna pakai dua asas piawaian perakaunan yang berbeza sebelum penggunaan IFRS. Hasil kajian menunjukkan kualiti maklumat kewangan meningkat selepas penggunaan IFRS. Keputusan ujian juga menunjukkan bahawa peningkatan kualiti lebih ketara bagi negara yang berubah dari asas berdasarkan peraturan dalam penyediaan piawaian perakaunan ke IFRS. Kata kunci: IFRS; kualiti maklumat; Malaysia; Filipina INTRODUCTION The demand for high quality financial information has increased in the past few years due to recent financial scandals, such as Enron and WorldCom (USA); Renong (Malaysia); and HIH Insurance (Australia) (Gaio 2010). The lack of transparency and low quality financial information disclosed are among the contributing factors to these scandals (Muniandy & Ali 2012). Such scandals generated calls for increased transparency and prompted authorities and scholars to determine ways to encourage firms to prepare and disclose high quality financial information. Academicians, such as Armstrong et al. (2010), believe that one promising mechanism is the application of a common set of standards. In order to create a uniform global system for financial reporting, the International Accounting Standards Committee (IASC) was formed in 1973.The principal ambitions of the IASC include developing International Accounting Standards (IASs) with the aim of harmonizing the accounting standards. However, little success has been made in relation to the goal of harmonization. Among the cited reasons for the failure to achieve harmonization is that IASs are not sufficiently comprehensive flexible to be applied to the numerous alternatives available for resolving a singular accounting issue (Saudagaran 2004). Chapter 9.indd 93 2/24/2014 3:45:59 PM