The value relevance of financial instruments disclosure: evidence from Jordan

Abstract

Purpose The purpose of this paper is to: examine the value relevance of financial instruments disclosure (FID) provided by Jordanian listed companies under International Financial Reporting Standard (IFRS 7) as compared to that supplied under IAS 30/32; provide evidence about the value relevance of high vs low levels of FID; and investigate which components of FI-related information are more value relevant. Design/methodology/approach A sample of 70 Jordanian listed companies is used in this monograph. A disclosure index checklist was constructed to measure FI information provided by the sample companies. In addition, a valuation model is employed to test the association between FID and market value. Findings Although evidence is provided that FI information was value relevant over the two periods of investigation, the information supplied after the implementation of IFRS 7 was more strongly associated with market values. An analysis of the sub-components of FID reveals that the details about balance sheet, fair value and risk information matter when valuing equity. Overall, the results indicate that investors value FI-related information when making their equity pricing decisions. The result suggests that compliance with IFRS mandatory disclosure requirements does produce relevant financial statements. Research limitations/implications The results of the current study have a number of implications for policy makers. First, they provide a great deal of insight for the IASB about the relevance of its standards to countries outside the western context. In addition, the findings provide valuable insights for policy makers in Jordan who are concerned about the implications of mandatory disclosures. Originality/value The analysis of FID in developing countries in general, and in Jordan in particular, has been overlooked by the extant literature and therefore this study is the first of its kind to examine this research issue for a sample of Jordanian firms.

Analysis of Tax Aggressiveness and Financial Reporting Aggressiveness on Public Companies in Indonesia 2010-2014

“…Value relevance is also described as the ability of financial statements to explain market value 6 . Value relevance in accounting disclosure is considered as a useful basic determinant of information 7 . According to Article 44, paragraph 1m of the Income Tax Law, the excess of fixed assets revaluation is treated as a tax object, as it is an additional economic resource obtained by the company 8 .…”

The extent of segmental reporting and its value relevance: cross-country evidence

“…The possibility that the variance of the error term might not be constant was accounted for using White's (1980) procedure, and the results indicated that heteroskedasticity was not an issue, since White's correction did not alter the findings. Lastly, the Ramsey Reset test was used to test whether the correct specification of the models was employed (Tahat et al, 2016). The evidence from this Ramsey Reset test suggested that all of the models were correctly specified as linear equations.…”

“…equations by calculating the Variance Inflation Factor (VIF); a value of greater than 10 indicates that a significant amount of collinearity may be present (Tahat et al, 2016). An analysis of Tables 5 and 6 indicates VIF values of between 1 and 5, confirming that multicollinearity is not an issue when interpreting the regression equations.…”

“…For instance, the Jordanian government has implemented several economic reforms in order to enhance private sector activity, to develop the economy, and to attract foreign investment; it established the Amman Stock Exchange (ASE) in 1999 and introduced a comprehensive set of business laws. These, and other changes, have been associated with an increase in equity trading volumes and a rise in the number of foreign investors who own shares in Jordanian listed companies (Tahat et al, 2016;Haddad et al, 2017). Similarly, the state of Qatar has experienced a great deal of economic development over the last few years -and more changes are planned for the future (AlNaimi et al, 2012;Al-Mannai and Hindi, 2015;.…”

“…The Ohlson (1995) Model is used for this purpose; this model has been widely employed by many empirical studies in booth developed and developing countries (Ahmed et al, 2015;Tahat et al, 2016;. It aims to measure the value relevance of information by looking at changes in a company's market value following the publication of the information.…”