Revisiting the effectiveness of the German accounting enforcement reforms: a replication study

In this paper, we replicate and extend the study “Economic Consequences of Accounting Enforcement Reforms: The Case of Germany” published by Ernstberger, Stich and Vogler (ESV) in the European Accounting Review in 2012. ESV (in Eur Account Rev 21(2):217–251, 2012) is, among others, widely cited for the evidence it provides on the weak but consistently positive effects of the German accounting enforcement reforms on earnings quality, stock liquidity and market valuation. The results were to be expected and are in line with the literature prior to 2012. More recent empirical archival and survey studies question these weak positive effects and, in particular, their persistence. Hence, we believe it is beneficial to provide further evidence on whether regulatory measures in the field of financial reporting show the intended “impact” and contribute to regulators’ objectives. As a first step, we replicate ESV (2012), and in a second step, we extend the analysis to a longer-term investigation period. While some of our findings are similar to ESV (2012), we are not able to provide consistent evidence for an increase in earnings quality, stock liquidity or market valuation.