The International Financial Reporting Standards 9 financial instruments, information quality and stock returns in the modern technology era

Abstract

PurposeThis paper investigates the relationship between information quality and stock returns during the International Financial Reporting Standards (IFRS 9) pre-adoption announcements and examines the influence of modern technology on these relationships across 24 emerging countries.Design/methodology/approachThis paper conducts an event study using data obtained from the DataStream, Osiris, International Telecommunication Union (ITU) and the World Bank databases from 2009 to 2014. The non-linear generalized additive model (GAM) was implemented to test the study hypotheses.FindingsResults indicate a significant positive non-linear relationship between low information quality and stock returns during IFRS 9 pre-adoption announcements. This result implies that IFRS 9 announcements have a positive impact on corporations with low pre-adoption quality information. This result is also more pronounced in small rather than large corporations and financial rather than nonfinancial institutions. Furthermore, modern technology plays a significant decisive antecedent role, while industry type has a moderating effect on the relationship between information quality and stock returns. The codified legal system has a positive impact on stock returns across emerging countries.Research limitations/implicationsData unavailability in some emerging countries.Practical implicationsThe empirical evidence provides useful guidelines for corporate managers, investors, international accounting standard-setters and regulators to improve financial reporting practices.Originality/valueThis paper extends the work of Armstrong et al. (2010); Onali et al. (2017) by including the impact of non-linear relationships using GAM analysis and the role of modern technology across emerging countries.

Digital disruption of accounting information and quality of financial reporting of listed money deposit banks in Nigeria

“…However, if a corporation surveyed many accountants and summed up their responses, it would appear impartial and objective. The degree of error-freeness describes the degree to which information is error-free (Balios, 2021;ElKelish, 2021).…”

Meta-frontier and measures of efficiency emphasising optimal corporate governance risk across countries

“…The common law system, however, provides better support for corporate transparency, investor protection and International Financial Reporting Standards (IFRS) adoption (Bushman et al, 2004;La Porta et al, 1998;Zehri and Chouaibi, 2013). Klapper and Love (2004) found that firm-level governance is, on average, low in weak legal systems, whilst other studies have found that a codified legal system has a positive impact on stock returns across emerging countries (ElKelish, 2021). Law enforcement such as the rule of law and control of corruption reflects the extent of confidence and acceptance of societal rules, contract enforcement quality, property rights, the courts, crime and violence prospects (Armstrong et al, 2010;Kaufmann et al, 2011;Drobetz and Momtaz, 2020).…”