RELATIONSHIPS BETWEEN PROFITABILITY AND THE IFRS APPLICATION ON AN EXAMPLE OF THE EUROPEAN LISTED COMPANIES

An aim of the article is to verify empirically if the IFRS application is connected with profitability of enterprises in the selected states of the European Union. An influence of the theory of agency, asymmetry and signalling on the relationships between the IFRSs and profitability is presented in the article. An influence of the IFRSs at a level of conservatism of financial results, including relationships between an application of IFRSs and profitability in the context of risk, capital costs and a quality of a financial result was presented. Public manufacturing companies from the following states: Belgium, Finland, France, Germany, Greece, Italy, Holland, Spain, Sweden, Great Britain, Latvia, Lithuania, Poland, Slovakia and Slovenia were the subject of the analysis. The relationships between the IFRSs and ROA, ROE, ROS and EPS were subjected to the empirical verification. The relationships between the IFRSs and profitability were verified empirically in a positive way in the enterprises from Eastern Europe, while those relationships for the enterprises from Western Europe proved to be very weak. Significance of differences was confirmed by Mann-Whitney tests. The investigations verifying the relationships between the IFRSs and profitability ratios simultaneously in the enterprises from Western and Eastern Europe should be considered as relatively new in the subject literature.