This thesis investigates whether IFRS adoption has led to an increase in the relevance of accounting information for investment decisions. Furthermore, the effects of IFRS are implicitly compared across accounting traditions. As such,  the effects of IFRS on the “quality” of financial reporting are measured based on the cases of listed firms in Germany and listed firms in the UK. This study approaches the effects of IFRS on the quality of financial reporting from two angles. First a review of the academic literature is done to determine whether there has been a general consensus about the effects of IFRS adoption on financial reporting of listed firms in Germany and the UK. As a result of this literature study, a number of propositions are deduced about the effects of IFRS. Subsequently, the investigation of the effects of IFRS takes a statistical perspective. Financial and accounting data are obtained for two samples, one of German listed firms and another of UK listed firms. A number of empirical models are used to determine the quality of financial reporting, including the earnings-returns association (Lev ,1989; Lev & Zarowin, 1999), asymmetric sensitivity of earnings and asymmetric persistence of earnings (Basu, 1997), and the market-to-book ratios (Roychowdhury & Watts, 2003). Additionally, a new tool is introduced for a joint interpretation of the econometric test results, leading potentially to a new method of financial report analysis under dynamic regulatory conditions. Significant statistical evidence is found suggesting a drastic reduction (to the point of complete elimination) in income smoothing in Germany corresponding to the transition from the German national GAAP to IFRS. Additionally, with the introduction of IFRS, the information content of accounting earnings in German firms appears to have increased substantially, while market-to-book ratios have converged towards “1”. On the other hand, the introduction of IFRS in the UK corresponds to statistical evidence consistent with a shift from asymmetric timeliness of earnings under UK GAAP to a significant downward bias in earnings under IFRS. The study also shows significant inter-industry differences in the effects of IFRS that suggest that the inconsistencies in the results of previous studies may have been due to the significant noise created by diverse samples, or due to biased industry representations in the data.

Previous research has confirmed the existence of a value premium in a wide array of markets and using this value stock anomaly has yielded superior performance. This thesis investigates if one could take advantage of the existence of a value premium to deploy a dynamic investment strategy on the Swedish stock market (OMXS30) with focus on minimizing risk to achieve higher risk adjusted performance than the stock market index. The investment strategy implemented use Market-to-Book-Value to screen for both entry and exit signals and Modern Portfolio Theory, using the minimum-variance portfolio with short-selling constraints, to allocate assets within the portfolio. The investment strategy is evaluated using the Modigliani-Modigliani Risk Adjusted Performance measure. Conclusions from the thesis are that the strategy does outperform the Swedish stock market index, both in terms of nominal return and risk-adjusted performance. The suboptimal behaviour of investors where they overreact  to signals and unconsciously rely on heuristics is used to explain why this is possible. Market-to-Book-Value, using the first quartile as entry signal and third quartile as exit signal, is considered to be a successful key ratio to screen for value stocks.