Download or read book Cost of Equity Effects from Mandatory IFRS Adoption Legal and Financial Institutions and Auditor Quality Dimensions written by Raymond Leung and published by . This book was released on 2015 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines if cost of equity can be negatively affected by mandatory IFRS adoption. Also, this paper explores how cost of equity effects differ depending on different national level of governance mechanisms because financial reporting incentives are influenced by both accounting regulation and institutional factors. While I document that mandatory IFRS adoption negatively influences cost of equity beyond the transition period, however, such observed results may also be attributed to the concurrent evolving effects from legal quality and enforcement, stock market development and auditor quality. Given that most cross-country national governance studies only apply a set of dated and static indices; I argue that using, time-varying and cross-sectional institutional indices can provide better measurement of both individual and interactive effects on firm-level cost of equity. While average legal mechanisms are an important factor, the results show that increase (decrease) in regulatory quality (legal enforcement) interacts with post-IFRS period significantly (insignificantly) and associate with lower (higher) ex-ante cost of equity. Moreover, I find that countries with different legal origins systematically associate with different dimensions of stock market development to reduce the cost of equity. Also, auditor quality is effective to reduce information asymmetry, but it highly depends on national legal quality and enforcement. Finally, I document that when cost of equity is lowered, it benefits firms with higher value.
Download or read book IAS IFRS written by Vera Palea and published by FrancoAngeli. This book was released on 2006 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cost of Equity Effects from Mandatory IFRS Adoption written by Raymond Wai-To Leung and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effects of IFRS Adoption in the European Union on Banks Cost of Equity written by Vera Palea and published by . This book was released on 2019 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effects of disclosure level on the cost of equity are a matter of considerable interest and importance to the financial reporting community. Economic theory indeed claims that commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. Accordingly, this paper investigates the effects of IFRS adoption in Europe on the cost of equity for the bank industry. In doing so, it performs an event study, which isolates the effects of accounting changes on the cost of capital from institutional and enforcement mechanisms. This study shows that IFRS adoption has exerted, on average, a positive effect on the cost of capital for the bank industry at least in the very short run. Firms adopting IFRS seem to have experienced a lower cost of equity in the period immediately subsequent the release of financial reporting according to the new accounting standard set.
Download or read book Signalling Under Uncertainty written by Osman Ghani and published by . This book was released on 2019 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the liquidity, Tobin's Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will influence the economic consequences derived from implementing the new standards. Country level uncertainty avoidance is predicted to lead to lower liquidity and Tobin's Q, and a higher cost of equity for mandatory adopters in higher UAI countries, while higher UAI is expected to benefit voluntary adopters in terms of higher liquidity and Tobin's Q, and a lower cost of equity. To test these predictions, we partition the firms into non-adopters, voluntary adopters, and mandatory adopters and also classify firms according to the change in their financial reporting quality. We analyse whether capital markets effects are different across the various groups based on the level of uncertainty avoidance in the host country. We find that prior to the mandatory adoption of IFRS by the EU member states, voluntary adopters in higher UAI countries benefited from increased liquidity and Tobin's Q, compared to identical firms in lower UAI countries, mandatory adopters and non-adopters. However, we find that this result is not persistent post the EU mandate, and that UAI influences both mandatory and voluntary adopters in a similar manner post 2005. The results from the cost of equity analysis suggest that market participants treat mandatory and voluntary adopters in an almost identical manner and that a higher UAI leads to both groups of firms exhibiting a reduction in their cost of equity. Our findings imply that uncertainty avoidance is able to explain part of the heterogeneity exhibited in the capital market outcomes between firms and across countries that have adopted IFRS.
Download or read book IFRS Adoption and Financial Reporting Quality written by Habeeb Mohamed Nijam and published by . This book was released on 2016 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional and commonly held wisdom with respect to the adoption of International Financial Reporting Standards (IFRS) is that they lead to improved financial reporting quality and comparability and thereby favorable economic consequences. There are however contradicting evidences disproving this conventional wisdom or rejecting its gross generalization over the entire jurisdictions harmonizing on IFRS. Driven by this fact, quests for knowledge about the dynamics and contexts that lead to differential effects of IFRS get momentum. In an attempt to explore the insight into the effects of international accounting harmonization by way of IFRS adoption, this paper reviews selected literatures on consequences of IFRS adoption. This review discusses some empirical evidences that have been reported in various countries that include Europe, USA, United Kingdom, Germany, Spain, Norway, Greece, Poland, Belgian, France, Italy, Turkey, United Arab Emirates (UAE), Kuwait, Jordan, China, Malaysia, Australia, Hong Kong, New Zealand, Kenya and Nigeria. Our review focuses on the aspects of value relevance, disclosure quality, cost of capital, earning management and financial statement impact due to the IFRS adoption. This review reveals that economic consequences of IFRS adoption significantly differ across jurisdictions though being its impact reported to be positive in majority of cases. There are also notable number of studies that report indifferent and or negative effects of IFRS adoption. When IFRS studies report mixed evidence with respect to value relevance of book value of equity and earing, book value of equity supersedes the earning parameters. IFRS are found to supersede many other domestic financial reporting standards in terms of volume and quality of disclosures in financial statements. This review also obtains that IFRS' impact on the reduction of cost of capital depends on financial reporting incentives, law enforcement, types of legal systems and various other country and capital market specific characteristics. Further, though there are some evidences to the contrary, the quality of earnings reported under IFRS has been established to be superior to that under other local standards.
Download or read book Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital written by Siqi Li and published by . This book was released on 2011 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union (EU) in 2005 reduces the cost of equity capital. Using a sample of 6,456 firm-year observations of 1,084 EU firms during the 1995 to 2006 period, I find evidence that, on average, the IFRS mandate significantly reduces the cost of equity for mandatory adopters by 47 basis points. I also find that this reduction is present only in countries with strong legal enforcement, and that increased disclosure and enhanced information comparability are two mechanisms behind the cost of equity reduction. Taken together, these findings suggest that while mandatory IFRS adoption significantly lowers firms' cost of equity, the effects depend on the strength of the countries' legal enforcement.
Download or read book Essays on the Economic Consequences of Mandatory IFRS Reporting around the world written by Ulf Brüggemann and published by Springer Science & Business Media. This book was released on 2011-08-31 with total page 162 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ulf Brüggemann discusses and empirically investigates the economic consequences of mandatory switch to IFRS. He provides evidence that cross-border investments by individual investors increased following the introduction of IFRS.
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Download or read book The Impact of Voluntary Adoption of IFRS on the Earning Quality and the Cost of Capital written by Dalia Ezzat and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this research is to investigate the direct relationship between the voluntary adoption of IFRS and cost of capital. Also, it investigates the indirect effect of earning quality on the voluntary adoption of IFRS and cost of capital. These relationships have been a very important issue and topic for researcher since IFRS became mandatory in EU at a beginning of 2005. Therefore, the aim of this study is to explore the nature of relationship between voluntary adoption of IFRS on the cost of capital and earning quality in Egypt and European firms. The sample is collected from the financial statements of 20 Egyptian and European firms as a secondary source of data. The 20 firms are classified into 10 adopting EAS in Egypt and the other 10 adopting IFRS in Europe from 2006 to 2015. The sample was from a range of industrial sectors. The results show that there is a negative relationship between voluntary adoption of IFRS and cost of capital. Costs of capital reduced in firms adopt EAS more than IFRS. Also, earning quality is not considered to be a mediator because it does not affect the relation of voluntary adoption of IFRS and cost of capital. However, there is a significant positive relationship between voluntary adoptions of IFRS on earning smoothness and accrual quality. Also, there is a negative relationship between earning quality and cost of capital.
Download or read book The Effects of the IAS IFRS Adoption in the European Union on the Financial Industry written by Vera Palea and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry have been examined. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the adoption of the IAS/IFRS in the European Union by Regulation 1606/2002 has led effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator's purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as accomplished. Furthermore, they point out that firms which implemented the IAS/IFRS have gained a comparative advantage on the equity market over firms still adopting accounting standards based on the IV and VII European Directives.
Download or read book Does Mandatory Adoption of IFRS Have Similar Economic Consequences Across Country Classification A Cross Sample Comparison of Developed Versus Developing Countries written by Solomon George Zori and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the economic consequences of mandatory International Financial Reporting Standards (IFRS) adoption from firm and country level perspective, and across country classification (developing vs. developed economy). Using a global sample of firms from 59 countries spanning from 1993-2016, and applying difference-in-differences design, we analyze the induced changes in the cost of equity/debt capital following IFRS adoption. We find that mandatory adopters in developing countries are more likely to experience significant decreases in the cost of capital in the post-adoption period than firms in developed countries. Furthermore, we find that this is also the case if the firms are located in countries that exhibit low governance quality. In developed countries, IFRS adoption seems most beneficial to firms which are located in strong shareholder protection regimes, whereas high governance quality does not show positive effects. On country level, however, we do not find evidence that mandatory IFRS adopters experience a decrease in the cost of debt in the post adoption period, neither for developing nor for developed countries. Overall, our findings suggest positive economic consequences of mandatory IFRS adoption for firms in developing countries, even if these countries exhibit weaknesses in institutional settings.
Download or read book Meta analysis of the Impact of Adoption of Ifrs on Financial Reporting Comparability Market Liquidity and Cost of Capital written by Solomon Opare and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The German Financial System written by Jan Pieter Krahmen (editor) and published by . This book was released on 2004 with total page 550 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by a team of scholars, predominantly from the Centre for Financial Studies in Frankfurt, this volume provides a descriptive survey of the present state of the German financial system and a new analytical framework to explain its workings.
Download or read book The Effects of Mandatory IFRS Adoption in the EU written by Brian Singleton-Green and published by . This book was released on 2015 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the empirical research evidence on the effects of mandatory IFRS adoption in the EU. The research is classified and assessed in relation to the objectives of EU Regulation 1606/2002, which made IFRS mandatory in the EU. The review finds that there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. But the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. What is clear is that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries. On the possible role of IFRS in the financial crisis in the EU, more research is needed before conclusions can be drawn. The paper also considers the problems of interpreting the research and drawing conclusions from it for policy making purposes.
Download or read book Mandating IFRS written by Dr. Edward Lee and published by . This book was released on 2008 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book International Financial Reporting Standards Institutional Infrastructures and Costs of Equity Capital around the World written by Shauna Shi and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct a large sample of 21,608 firm-years with International Financial Reporting Standards (IFRS) adopters and non-adopters from 34 countries over the 1998-2004 period, and evaluate differences in the implied cost of capital between the IFRS adopters and the non-adopters. We also investigate whether and how the cost-of-capital effect of IFRS adoptions is differentially influenced by the efficacy of institutional infrastructures determining a country's corporate governance and enforcement mechanisms. Our results reveal the following. First, we find that the cost of equity capital is significantly lower for the full IFRS adopters than for the non-adopters, suggesting that the IFRS adopters benefit from greater and better disclosures via IFRS by having a lower cost of raising capital from equity markets. Moreover this result holds, irrespective of a country's institutional infrastructure. Second, we find that the cost of capital decreases with the efficacy of institutional infrastructure. Finally and more importantly, we find that the cost of capital-reducing effect of IFRS adoption is greater when the IFRS adopters are from countries with weak institutional infrastructures than when they are from countries with strong infrastructures. The above results are overall robust to the use of alternative measures of the expected cost of capital and a battery of sensitivity checks.
