Does IFRS Drive Information Asymmetry Reduction? Evidence from Asean-6 Countries

Nejad, Maryam Yousefi; Ahmad, Azlina; Rahim, Ruzita Abdul; Salleh, Fairuz Md

doi:10.17576/ajag-2020-14-08

Cited by 3 publications

(5 citation statements)

References 34 publications

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“…The adoption of high-quality accounting standardssuch as IAS/IFRSimproves the accuracy and comprehensibility of financial information, helping professional and non-professional investors in their decision-making (Diamond & Verrecchia, 1991;Leuz & Verrecchia, 2000;Biddle et al, 2009;Roychowdhury et al, 2019). Moreover, the increase of information transparency can incentivise managers to have a more investor-oriented approach, thus reducing opportunistic behaviour (Ball & Shivakumar, 2005;Shin & Oh, 2017) and agency costs (Bushman & Piotroski, 2006;Nejad et al, 2020). In addition, the adoption of common accounting language can improve the trading in the debt market, making for easier access to bank loans (Ball, 2006;Balsmeier & Vanhaverbeke, 2018).…”

Section: Discussionmentioning

confidence: 99%

Accounting Harmonisation through IAS/IFRS and Internationalisation: Evidence from FDIs and Cross-Border M&A

Montani¹,

Gervasio²,

Pulcini³

et al. 2021

AFR

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The process of accounting harmonisation via International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) adoption is very widespread, and it is still involving a huge number of countries all over the world.Previous academic literature investigated the impact of this process from different perspectives, such as the quality of financial reports, the transparency of financial disclosures, the liquidity of the financial markets and the cost of equity.The aim of this article is to contribute to the research stream exploring the effects of IAS/IFRS adoption, investigating if accounting harmonisation through the IAS/IFRS has had an impact on the internationalisation process. To achieve our objective, two multiple linear regression analyses are presented. The first one focuses on the impact of the adoption of IAS/IFRS on foreign direct investments (FDIs) using data collected from a sample of 34 Organisation for Economic Co-Operation and Development (OECD) member countries. The second statistical analysis investigates the influence of IAS/IFRS adoption on cross-border mergers and acquisitions (M&A), considering operations carried out by European-listed companies towards target companies located in the 34 OECD member countries. The FDIs and cross-border M&A are considered proxies of the internationalisation process.Preliminary results show that the adoption of IAS/IFRS has positively affected FDI flows and increased the value of cross-border M&A.This study has tried to provide theoretical contributions to the literature stream about the effects of the harmonisation process with IAS/IFRS adoption, showing the beneficial impact they may have on the internationalisation process. Moreover, our findings can be useful for policymakers and managers, suggesting that becoming IAS/IFRS adopters can facilitate the internationalisation process of the companies.

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Section: Discussionmentioning

confidence: 99%

Accounting Harmonisation through IAS/IFRS and Internationalisation: Evidence from FDIs and Cross-Border M&A

Montani¹,

Gervasio²,

Pulcini³

et al. 2021

AFR

View full text Add to dashboard Cite

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“…Financial statements provide valuable information which can be used in decision-making processes by stakeholders and elevate the market's response (Ball and Brown, 1968). The broad application of IFRS globally aims to improve the quality of disclosure, mitigate information asymmetry, and reduce agency costs (Nejad et al, 2020;Deef et al, 2021). Over the last few decades, many studies examined the economic impact of adopting IFRS with a major focus on how adoption influences disclosure quality and financial markets.…”

Section: Theory and Hypotheses Developmentmentioning

confidence: 99%

“…As a result, information asymmetry between management and investors becomes a problem. The relationship between management and investors is problematic for at least two reasons (Nejad et al, 2020). First, management usually has more information about the firm's value than investors and has motives to overestimate that value.…”

Section: Market Reactions and Ifrs Adoptionmentioning

confidence: 99%

“…Second, IFRS reduces management's discretion in financial reporting decisions and enhances disclosure quality. Therefore, IFRS adoption is a crucial tool to reduce information asymmetry, by increasing transparency about the firm's value, and improve market liquidity (Nejad et al, 2020).…”

Section: Market Reactions and Ifrs Adoptionmentioning

confidence: 99%

“…Therefore, additional research is required to understand the economic implications of adopting IFRS on disclosure quality. On the other hand, several investigations of the economic implications of IFRS adoption on the stock market demonstrated positive effects on both cost of equity and capital market liquidity (Li et al, 2021;Khan et al, 2021;Nejad et al, 2020;Abad et al, 2017;Armitage et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Adopting IFRS as a Moderating Variable on the Relationship Between Accounting Information and Market Responses

Deef

Radi

2022

International Journal of Customer Relationship Marketing and Management

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The purpose of this paper is to examine the impact of adopting International Financial Reporting Standards (IFRS) on the relationship between accounting information and market responses. We investigate the impact of the IFRS adoption on financial statements quality and whether this impact, if any, has a positive implication of the capital market (especially, market liquidity and equity value). Data were collected from 147 non- financial firms listed on the Saudi exchange for the period 2015-2019. The findings show that disclosure quality has increased because of IFRS adoption. Moreover, the results find that the adoption of IFRS improves market liquidity and increases the share price of firms listed on the Saudi exchange. Our findings show that adopting IFRS have positive economic implications on the Saudi business environment.

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IFRS and FPI nexus: does the quality of the institutional framework matter for African countries?

Simbi

Arendse

Khumalo

2022

JAEE

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PurposeThe institutional framework of an African country may influence the effectiveness of the International Financial Reporting Standards (IFRS) on foreign investment inflows. The purpose of this paper is to argue that the quality of a country's institutional framework impacts the effectiveness of IFRS to an adopting country and ultimately influences the levels of Foreign Portfolio Investment (FPI).Design/methodology/approachEmploying country-level data. A sample of 15 countries from Africa is used. Data is collected over a period of 22 years (1994–2014). The authors employ the General Method of Moments (GMM) panel regression technique to examine whether the quality of a country's institutional framework has an impact on the relationship between IFRS and FPI and the Propensity Score Matching (PSM) technique to assess the level of impact.FindingsThe findings reveal that the quality of a country's institutional framework moderates the strength of the association between IFRS and FPI. Overall, the authors find that the quality of the institutional frameworks in African countries has a negative effect on the IFRS and FPI nexus.Research limitations/implicationsThe study focuses exclusively on African countries; using an exclusively African sample limits the generalisation of results to other continents like Latin America with similar environments to Africa.Practical implicationsThis study provide evidence that IFRS alone cannot ensure the intended capital market benefits but encourages the development of strong institutions in African countries to realise the most from IFRS adoption. The emphasis on institutional development is an essential contribution that this study makes.Originality/valueThis study is unique since it emphasises the importance of institutional framework quality when considering the impact of IFRS on foreign investment inflows in an African setting.

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Does IFRS Drive Information Asymmetry Reduction? Evidence from Asean-6 Countries

Cited by 3 publications

References 34 publications

Accounting Harmonisation through IAS/IFRS and Internationalisation: Evidence from FDIs and Cross-Border M&A

Accounting Harmonisation through IAS/IFRS and Internationalisation: Evidence from FDIs and Cross-Border M&A

Adopting IFRS as a Moderating Variable on the Relationship Between Accounting Information and Market Responses

IFRS and FPI nexus: does the quality of the institutional framework matter for African countries?

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