Marcus Salewski, Torben Teuteberg, Henning Zülch

• This study iestigates the effect of IFRS adoption on the transparency of financial reporting in Germany. For a sample period from 1995 to 2012, we analyze the development of the degree of earnings management and of disclosure quality using discretionary accruals and disclosure quality scores from an annual report ‘beauty contest’ published by a German business journal as proxies. We find that IFRS adoption is associated with an increase in disclosure quality and with an initial increase in the extent of earnings management. We argue that the latter is driven by factors such as low compliance, lack of experience and weaker enforcement in the early years of IFRS accounting and show that the degree of earnings management decreases from the ‘early’ to the ‘mature’ phase of IFRS accounting. Finally, we provide evidence for a negative association between disclosure quality and earnings management indicating that disclosures potentially constrain earnings management._x000D_ Keywords: IFRS adoption, earnings management, earnings quality, disclosure quality