Market Reaction to the Adoption of IFRS in Europe

Armstrong, Christopher; Barth, Mary E.; Jagolinzer, Alan D.; Riedl, Edward J.

doi:10.2308/accr.2010.85.1.31

Cited by 779 publications

(597 citation statements)

References 42 publications

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“…Our analysis also contributes to the burgeoning literature on international accounting convergence. Prior research attributes significant capital market benefits to mandatory IFRS adoption (Byard et al 2011, Armstrong et al 2010, Covrig et al 2007) and coincident improvements in securities regulation (Christensen et al 2012(Christensen et al , 2011, whereas the impact of international reporting convergence on the equity valuation process has gone unexplored. It is well established that accounting differences affect foreign analyst following and forecast accuracy negatively, suggesting analysts cannot adjust fully for GAAP differences (Bae et al 2008).…”

Section: Introductionmentioning

confidence: 99%

Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Young

Zeng

2015

The Accounting Review

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We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002, Journal of Accounting Research) and controlling for economic comparability, we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance.Empirical tests using firms from 15 EU countries over the period 1997-2011 (with comparable peers selected from the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of crossborder accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection.

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Section: Introductionmentioning

confidence: 99%

Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Young

Zeng

2015

The Accounting Review

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“…Com base na visão de que a contabilidade não existe no vácuo (HOUQE et al, 2012), mas é um produto do seu ambiente (ARMSTRONG et al, 2010), pode-se compreender melhor que a qualidade da informação contábil é influenciada por diversos fatores regulatórios, mas os incentivos empresariais também são proxies utilizadas para explicar os números contábeis reportados ao redor do mundo.…”

Section: Determinantes Da Qualidade Da Informação Contábilunclassified

Determinantes da qualidade da informação contábil no contexto internacional

Mazzioni

Klann

2016

R. Contemp. Contab.

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ResumoO objetivo do estudo é analisar a influência do grau de internacionalização das empresas, em conjunto com as normas reguladoras e os incentivos empresariais, na qualidade das informações contábeis. Para tanto, foi realizada pesquisa descritiva, documental e quantitativa com 1.406 empresas localizadas em doze países. A amostra considerou empresas que divulgaram informações sobre suas receitas e ativos no exterior, além das demais informações necessárias para operacionalizar os atributos de qualidade dos accruals, persistência, previsibilidade e suavização dos resultados. Após a mensuração individual de cada atributo por empresa, elaborou-se um ranking da qualidade da informação contábil, com base no método de análise multicritério TOPSIS e da técnica da entropia. Os resultados indicaram que, ao se considerar o ambiente legal, o nível de percepção da corrupção e a origem legal dos países hospedeiros das empresas, a menor alavancagem financeira e a maior intensidade na internacionalização das empresas se mostraram fatores determinantes para o melhor posicionamento no ranking da qualidade da informação contábil. Palavras-chave: Normas reguladoras. Incentivos empresariais. Internacionalização das empresas. AbstractThe objective of the study is to analyze the influence of the degree of internationalization of companies, together with regulatory standards and business incentives, the quality of accounting. For this purpose, descriptive, documentary and quantitative survey was conducted with 1,406 companies located in twelve countries. The sample considered companies released information about their income and assets abroad, in addition to other information needed to operationalize the attributes quality of accruals, persistence, predictability and smoothing. After individual measurement of each attribute by company, elaborated a ranking of the quality of accounting information, from the multi-criteria analysis method TOPSIS and entropy technique. The results indicated that, when considering the legal environment, the level of perception of corruption and the legal origin of the host countries of companies, lower financial leverage and the greater intensity in the internationalization of companies have proved decisive factors for the better position in the ranking the quality of accounting information.Keywords: Regulatory standards. Business incentives. Internationalization of the companies. ResumenEl objetivo del estudio es analizar la influencia del grado de internacionalización de las empresas, junto con las normas reguladoras y con los incentivos empresariales, in la calidad de la información contable. Por lo tanto, la investigación descriptiva, documental y cuantitativa se realizó con 1.406 empresas ubicadas en doce países. La muestra fue considerada por las compañías con información sobre sus ingresos y activos en el exterior, además de otra información necesaria para poner en práctica los atributos de calidad de acumulaciones, la persistencia, la previsibilidad y suavización de los resultados. Después de la...

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“…Armstrong, Barth, Jagolinzer, and Riedl (2006) examined the European stock market reaction to key events predicted to affect the adoption of IFRS in Europe. Their analyses provide evidence that the European equity markets responded positively (negatively) to events that increased (decreased) the likelihood of adoption of IFRS.…”

Section: Ifrs Adoption and Value Relevance Of Financial Statementsmentioning

confidence: 99%

Analysis of Hidden Value and Value Relevance of Financial Statements Pre- and Post-IFRS Adoption

Garg¹

2017

JMAA

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This study analyses the hidden value and value relevance of financial statements pre-and post-IFRS (International Financial Reporting Standards) adoption. Prior studies on IFRS adoption provide conflicting evidence on value relevance. Market-to-book ratio and IFRS adoption value relevance using price is examined for Australian listed firms. Results show that IFRS adoption is value relevant over a longer period of time. Results are opposite for profit-making firms compared to loss-making firms which may explain the conflicting results. In the presence of goodwill, IFRS is not value relevant when post-global financial crisis (GFC) period is included. Market-to-book ratio has increased in the post-IFRS period lowering the usefulness of financial statements. Moreover, results show that macro-economic changes affecting valuation of firms may explain for differences in the results for market-to-book ratio and value relevance in different jurisdictions and time periods. Keywords: goodwill, hidden value, International Financial Reporting Standards (IFRS), impairment, value relevance IntroductionSeveral studies around the world have examined the benefits of International Financial Reporting Standards (IFRS) adoption. But the results from these studies provide conflicting evidence. This makes it difficult to draw definitive conclusions about the benefits of IFRS adoption. Different regimes have used varying approaches on goodwill recognition prior to IFRS adoption. Therefore, while IFRS adoption had a uniform impact on the way goodwill is reported and impaired, in the pre-IFRS regime, there are differences across jurisdictions that adopted IFRS.In Australia, a key difference in IFRS is the impairment of goodwill as opposed to systematic amortization as in previous years. This study tries to examine the reason behind the inconclusive results using goodwill and segregation of firms based on profitability as key accounting items. The value relevance of IFRS is analysed over a longer period of time. Moreover, the study examines the usefulness of financial statements pre-and post-IFRS adoption and explores whether the usefulness has increased or decreased over a longer period of time.Market-to-book ratio of the Standard & Poor's 500 over the past two decades rose from just over one in the early eighties to a peak of six by 2000, falling back to 4.5 by late (Beattie & Thomson, 2005. Such large changes in the difference between market value of equity and book value of equity suggest over the last 20 years that the usefulness of financial accounting has reduced significantly. Lev (2002) suggested that the difficulty of valuing firms that deal with concepts, rather than tangible assets and growing size makes an Mukesh Garg, Lecturer, Department of Accounting, Monash University. Email: mukesh.garg@monash.edu. economy more susceptible to Enron type collapses. Lev and Zarowin (1999) provided evidence which indicates that the usefulness of reported earnings, cash flows, and book (equity) values has been deteriorating over the past two...

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Market Reaction to the Adoption of IFRS in Europe

Cited by 779 publications

References 42 publications

Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Determinantes da qualidade da informação contábil no contexto internacional

Analysis of Hidden Value and Value Relevance of Financial Statements Pre- and Post-IFRS Adoption

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