The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia

Abstract

We examined the joint and relative value relevance of book value of equity (BVE) and earnings before (2015–2016), after (2017–2018) and during the comparative year (2016) of mandatory adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. Results show that the accounting information is jointly value relevant (R2), with no significant change between accounting information prepared under Saudi GAAP and IFRS. However, we found a positive change in the relative value relevance of the BVE after IFRS implementation, mainly related to the introduction of fair value measurement. Differences in value relevance were found across variances in company characteristics.

Value relevance of accounting information in an emerging market: the case of IFRS adoption by non-financial listed firms in Saudi Arabia

“…The increase in the value relevance of equity is so extensive that the statistically insignificant association in the pre-adoption period becomes JAEE significant in the post-adoption period. Our results are, thus, consistent with the findings of Alomair et al (2022). However, the increased value relevance of earnings and equity in the post-adoption period is partially negated by a decrease in the value relevance of cash flow.…”

“…The book value of equity is positively associated with the market value of a company's share (BVPS*IFRS of 0.075 with a p value less than 0.001). Our results are consistent with the previous evidence for Saudi Arabia provided by Alomair et al (2022) or by Chebaane and Othman (2014) for other countries in the MENA region. On the other hand, Khanagha (2011) identified the opposite, i.e.…”

“…Although many articles have discussed the topic of IFRS in Saudi Arabia from different perspectives (Alnodel, 2015;Herath and Alsulmi, 2017;Hashed and Almaqtari, 2021), they have done so with only a fragmented investigation of value relevance characteristics (Alnodel, 2018;Alomair et al, 2022). We extend the existing literature by utilising a dataset of 588 firm-year observations for the period 2014-2019 (three years in the pre-adoption and three years in the post-adoption era) and applying the standard methodology of value relevance based on the Ohlson (1995) price model and the Easton and Harris (1991) return model.…”

“…by Alnodel (2018), who finds evidence of less value-relevant book value of equity and more value-relevant earnings in the post-IFRS period in the insurance sector (21 firms in the sample). A broader sample for the period 2015-2018 is examined by Alomair et al (2022), who do not find any significant variation in value relevance under Saudi GAAP and IFRS but identify an increase in the value relevance of the book value of equity in the post-adoption period. Finally, Aldoseri et al (2021) are interested in the moderating effect of IFRS adoption on the relationship between audit committees and the audit report lag, while Borgi et al (2021) assess the personal characteristics of the individual CEOs and their relation with the timely preparation of IFRS financial statements during the transition period.…”

Accrual estimates, earnings persistence and listed consumer and industrial goods firms in nigeria

“…It is the responsibility of the management to prepare financial reports, and communicate same to various users, who use it for decision making. According to Alomair et al [1] , accounting information is not worth presenting unless it has some minimum level of both relevance and reliability. This is particularly important because a credible and reliable accounting information is a sine-qua-non for proper decision making processes, since they portray the financial position and business performance of the entity.…”