Euro Adoption and the Quality of Accounting Information

The introduction of the euro as a single currency unit among the members of the EU was considered as a cornerstone of the fiscal policy of the European community and especially for the Greek economy. The present study considers the impact of the drachma’s replacement by the euro on the quality of accounting information (namely the value relevance of accounting amounts and the timely loss recognition) published by the Greek listed firms. Using a sample of 76 listed firms over the period 1995-2008, we found convincing evidence that the euro contributed to a decrease on the value relevance of accounting information and also increased the conservatism of financial statements, verifying previous arguments that the induction of Greece in the EMU resulted to less competitiveness and more financial instability. These findings are robust to several sensitivity tests with respect to the specification of the empirical models and the time period used in our study.