The value relevance of accounting information in the MENA region

2019 ◽  
Vol 17 (3) ◽  
pp. 519-536 ◽  
Author(s):  
Doaa El-Diftar ◽  
Tarek Elkalla
Keyword(s):  
Regression Model ◽  
Developing Economies ◽  
Negative Impact ◽  
Value Relevance ◽  
Accounting Information ◽  
Mena Region ◽  
Content Type ◽  
Ifrs Adoption ◽  
The Impact ◽  
Is Value

Purpose The purpose of this paper is to examine the value relevance of accounting information in the Middle East and North Africa region (MENA) region with an emphasis on the potential impact of IFRS adoption. This paper aims to not only examine the value relevance of accounting information in the MENA region but also draw comparisons between Gulf countries (GCC) and non-GCC country firms to determine whether there are distinct differences across the two regions. Design/methodology/approach To investigate the value relevance of accounting information in the MENA region, two pooled regression models are used based on the Ohlson (1995) model. The first regression model is conducted for the GCC and non-GCC regions separately. A second regression model is conducted using a pooled sample of the MENA region collectively with dummy and interaction variables to further explore the potential differences between the two regions in terms of the value relevance of accounting information. Findings The empirical results show that the measures of accounting information have a highly significant positive relationship with the market value per share for firms in the MENA region, thereby indicating that accounting information in the MENA region is value relevant. Although book value per share and earnings per share are significant determinants of value relevance in both GCC and non-GCC country firms, operating cash flows per share is only a significant determinant of value relevance in non-GCC country firms. The research findings of the study also show a significant negative impact of IFRS adoption on the value relevance of accounting information in the MENA region. Practical implications This research paper provides important insights for investors and regulators by providing evidence that accounting information is value relevant in the MENA region, and that IFRS adoption does not necessarily lead to a greater degree of value relevance. In fact, investors and regulators should be aware that the adoption of IFRS in MENA country firms results in diminished value relevance of accounting information. This finding is of particular significance to policymakers attempting to improve accounting disclosure. Originality/value The paper expands the value relevance of accounting information literature in the context of developing economies, in general, and the MENA region, in particular. There is a paucity of research into the value relevance of accounting information for MENA country firms, particularly in the case of the impact of IFRS adoption. Thus, this paper provides an important contribution in terms of expanding the value relevance literature in relation to IFRS adoption in the MENA region.

scholarly journals Does the quality of voluntary disclosure constrain earnings management in emerging economies? Evidence from Middle Eastern and North African banks

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rami Ibrahim A. Salem ◽  
Ernest Ezeani ◽  
Ali M. Gerged ◽  
Muhammad Usman ◽  
Rateb Mohammmad Alqatamin
Keyword(s):  
Earnings Management ◽  
Regression Model ◽  
Least Squares ◽  
Voluntary Disclosure ◽  
Developing Economies ◽  
Future Research ◽  
Mena Region ◽  
Content Type ◽  
The Impact

Purpose This study aims to examine the influence of the quality of voluntary disclosure (QVD) on earnings management (EM) amongst a sample of commercial banks in the Middle East and North Africa (MENA) region. Design/methodology/approach Using a sample of 1,060 bank-year observations for the period 2006–2015, this paper developed a three-dimensional framework to measure the QVD, which considers the quantity, spread and usefulness of the information. Furthermore, this study examines the QVD-EM nexus using an ordinary least squares regression model. This technique is supplemented with conducting an instrumental variable regression model and a two-stage least squares model to overcome the potential occurrence of endogeneity problems. Findings The findings suggest that QVD is negatively attributed to EM in the context of MENA banks. The findings also confirm that the quality of financial reporting is enhanced by QVD dimensions that were considered in the framework, leading banks to less engagement in EM practices. In contrast, the influence of the quantity dimension (level) of the disclosed information has an insignificant impact on EM, while the spread and usefulness dimensions of VD are negatively and significantly associated with EM in the region. Research limitations/implications Although the results are robust to various measurements and to the possible occurrence of endogeneity problems, there are a few limitations should be acknowledged, which provides opportunities for future research. For example, the sample size is relatively small due to data accessibility issues. Likewise, the findings of the research might not be appropriate for non-financial sectors. These limitations provide a good opportunity for future studies to expand on the research by covering other developing economies and, thereby, enriching the understanding offered by this study. Practical implications This study offers several implications for bank managers, academics and policymakers. Firstly, it may help managers to appreciate the function and the importance of QVD in mitigating EM. Secondly, for academics, the study provides suggestive evidence on the impact of QVD on EM; however, future research may need to consider the role of morality and ethical behaviour across different environments in reducing excessive risk-taking and constraining earnings manipulation. Finally, it provides insights for policymakers and regulators to develop a framework or guidance that can help banks in providing high-QVD in the context of developing economies. Originality/value The study distinctively develops an innovative measurement for QVD using a new multi-dimensional model. This paper also bring new evidence on QVD complexity and its impact on EM practice from an under-researched developing context, namely, the MENA region.

Corporate governance and value relevance of accounting information

2020 ◽  
Vol 36 (2) ◽  
pp. 249-262
Author(s):  
Hesham I. Almujamed ◽  
Mishari M. Alfraih
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Information ◽  
Empirical Support ◽  
Board Size ◽  
Content Type ◽  
Book Value ◽  
Board Characteristics ◽  
Market Participants ◽  
The Impact

Purpose This paper aims to explore how the characteristics of the board of directors (BoD) shape earnings and book value information available to market participants. Design/methodology/approach The authors investigated the impact of board size, presence of non-executives and role duality as proxies of effective corporate governance on the value relevance of financial reporting for 178 firms on the Kuwait stock exchange in 2013. Regression analysis based on Ohlson’s (1995) valuation model was used to test hypotheses. Findings The authors found that board size was significantly associated with company value and that Kuwaiti firms with large boards increased the value-relevance of earnings and book value. The influence of role duality was positive although not significant. The presence of non-executives on the board had a negative correlation with market value (not significant). Research limitations/implications These findings deliver empirical support for the prediction that the characteristics of the BoD improve the value relevance of financial reporting. Limitations such as small sample size and one-year duration of the study did not negate the basic findings, however. Future studies will use larger samples, longer duration and additional board characteristics. Practical implications This study provides empirical support for the hypothesis that board size influences market valuation. This study may benefit managers, investors and other decision-makers. Originality/value This study delivers empirical evidence on the impact of board characteristics on the value relevance of accounting information. It will be useful for regulators and market participants monitoring the influence of board characteristics on the value relevance of accounting information.

scholarly journals Stock market liquidity, the great lockdown and the COVID-19 global pandemic nexus in MENA countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anas Alaoui Mdaghri ◽  
Abdessamad Raghibi ◽  
Cuong Nguyen Thanh ◽  
Lahsen Oubdi
Keyword(s):  
Stock Market ◽  
Negative Impact ◽  
Market Liquidity ◽  
Mena Region ◽  
Stock Market Returns ◽  
Content Type ◽  
Mena Countries ◽  
Global Pandemic ◽  
Stock Market Liquidity ◽  
The Impact

PurposeThe purpose of this paper is to investigate the impact of the global coronavirus (COVID-19) pandemic on stock market liquidity, while taking into account the depth and tightness dimensions.Design/methodology/approachThe author used a panel data regression on stock market dataset, representing 314 listed firms operating in six Middle East and North African (MENA) countries from February to May 2020.FindingsThe regression results on the overall sample indicate that the liquidity related to the depth measure was positively correlated with the growth in the confirmed number of cases and deaths and stringency index. Moreover, the market depth was positively related to the confirmed cases of COVID-19. The results also indicate that the liquidity of small cap and big cap firms was significantly impacted by the confirmed number of cases, while the stringency index is only significant for the liquidity depth measure. Moreover, the results regarding sectors and country level analysis confirmed that COVID-19 had a significant and negative impact of stock market liquidity.Research limitations/implicationsThis paper confirms that the global coronavirus pandemic has decreased the stock market liquidity in terms of both the depth and the tightness dimensions.Originality/valueWhile most empirical papers focused on the impact of the COVID-19 global pandemic on stock market returns, this paper investigated liquidity chock at firm level in the MENA region using both tightness and depth dimensions.

Digital corporate reporting and value relevance: evidence from the US and Japan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yuan George Shan ◽  
Indrit Troshani
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Value Relevance ◽  
Accounting Information ◽  
Financial Information ◽  
Content Type ◽  
Corporate Reporting ◽  
The Us ◽  
The Impact ◽  
Corporate Financial Reporting

PurposeThe study improves current understanding concerning the implications of digital corporate reporting technology on the informativeness of accounting information.Design/methodology/approachIt looks at how XBRL, an exemplar digital corporate financial reporting technology, affects value relevance of accounting information in the US and Japan, two key jurisdictions where XBRL has been mandated. We operationalise stock price and return value relevance models to assess and compare predicted associations between selected accounting measures and market value of equity in these countries.FindingsWe predict that the selected accounting measures are more value relevant after XBRL was mandated than before. We find evidence to support our prediction for the US sample. We also predict and find that the contribution of XBRL to the value relevance of the selected accounting measures is greater in the US than in Japan. Overall, our evidence provides support that digital corporate reporting technology enhances relevance and reliability of accounting measures.Originality/valueThe study appears to be the first to have examined the impact of XBRL on value relevance whilst comparing between two major jurisdictions. The study extends emerging but limited literature concerning the benefits of digital corporate financial reporting for enhancing the communication between firms and users of financial information. The findings are useful to both users of financial information and standard setters.

The effect of mandatory XBRL and IFRS adoption on audit fees

2016 ◽  
Vol 12 (2) ◽  
pp. 109-135 ◽  
Author(s):  
Yuan George Shan ◽  
Indrit Troshani
Keyword(s):  
Financial Reporting ◽  
Developing Economies ◽  
Stock Exchange ◽  
Audit Fees ◽  
Listed Companies ◽  
Emerging Economy ◽  
Economic Consequences ◽  
Content Type ◽  
Ifrs Adoption ◽  
The Impact

Purpose – The purpose of this paper is to evaluate the impact of the International Financial Reporting Standards (IFRS) and eXtensible Business Reporting Language (XBRL) on audit fees based on evidence from listed companies operating in an emerging economy. Whilst IFRS constitute high-quality accounting standards, XBRL represents a technology standard that can enhance the usability of IFRS and overall financial reporting transparency. Design/methodology/approach – Multivariate analyses are used on a sample of 1,798 firm-year observations between 2000 and 2011 from companies listed in the Shanghai Stock Exchange that were subject to XBRL and IFRS adoption mandates. Findings – The main results suggest that XBRL has a main negative effect on audit fees which is weaker for larger firms. Additionally, the authors find that IFRS increases audit fees for all companies. Whilst this effect is positive for firms of different sizes, it is weaker for larger firms. Research limitations/implications – Whilst the findings are applicable to the selected sample and may or may not be generaliseable to other economies, they can provide important implications for both regulators and companies that are undertaking IFRS convergence and XBRL implementation projects in developing economies around the world. Originality/value – This study offers a timely assessment of the economic consequences of IFRS and XBRL on listed companies operating in an emerging economy, in addition to providing an important basis upon which further research can be designed in order to extend the analysis.

The influence of IFRS mandatory adoption on value relevance of intangible assets in Italy

2020 ◽  
Vol 21 (3) ◽  
pp. 415-436
Author(s):  
Michela Cordazzo ◽  
Paola Rossi
Keyword(s):  
Intellectual Property ◽  
Research And Development ◽  
Stock Prices ◽  
Intangible Assets ◽  
Value Relevance ◽  
Accounting Standards ◽  
Content Type ◽  
Ifrs Adoption ◽  
Start Up ◽  
The Impact

PurposeFollowing the mandatory IFRS adoption in 2005, the Continental European accounting systems changed. This study investigates if it influenced the value relevance of intangible assets in Italy.Design/methodology/approachTo measure the value relevance of intangible assets of non-financial firms listed on Borsa Italiana from 2000 to 2015, this study isolates the impact of several classes of intangible assets on stock prices and then classifies firms according to intangible asset intensity.FindingsGoodwill, intellectual property and other rights, start-up costs or other intangible assets are significantly correlated with stock prices when Italian accounting standards were applied prior to 2005, whereas research and development expenditures are not associated with stock prices. The mandatory IFRS adoption has exerted positive effects only for goodwill and research and development expenditures, and it is negative for start-up costs. Further, when intangible-intensive firms are considered in the post-IFRS adoption period, declining value relevance exists relative to intellectual property and other rights or research and development expenditures; goodwill and other intangible assets increase in value relevance.Research limitations/implicationsThis study is subject to country-specific determinants and firm-specific characteristics. It treats accounting standards as exogenous, and the classification reflects the concentration of intangible assets in an industry. By relying on investors’ assessments of risk, it does not sufficiently explore the risk conveyed by future abnormal earnings and earnings volatility.Practical implicationsThis study offers insights for measuring and reporting intangible assets, by specifying that their value relevance depends on their level and aggregation.Originality/valueThis study investigates the value relevance of intangible assets in the post-IFRS period, in reference to intangible-intensive firms. It also divides intangible assets into several classes to specify the value relevance of goodwill.

Economic growth in European Union: does IFRS mandatory adoption matter?

2019 ◽  
Vol 14 (5) ◽  
pp. 792-808 ◽  
Author(s):  
Clement Oppong ◽  
Mehmet Aga
Keyword(s):  
Economic Growth ◽  
European Union ◽  
Financial Reporting ◽  
Developing Economies ◽  
Dynamic Panel Data ◽  
Content Type ◽  
Ifrs Adoption ◽  
Stage Of Development ◽  
Mandatory Adoption ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of International Financial Reporting Standards (IFRS) adoption on economic growth. Design/methodology/approach Using data from 2005–2014, the study examined whether the mandatory adoption of IFRS increases economic growth synchronicity in the European Union (EU) context. The study utilizes a sample of 28 countries containing 10-year observations in the EU market where IFRS have been adopted since 2005. The empirical model, relating to economic growth synchronicity with the adoption of IFRS, and other country-specific control variables were analyzed using the dynamic panel data technique. Findings Different specifications of the model results showed that IFRS adoption improves the economic growth and that IFRS adoption matters for developing economies than developed ones. It is, therefore, recommended that authorities in Europe should try to enforce the adoption and implementation of IFRS, especially among the developing economies. Originality/value The paper’s investigation of the impact of IFRS on economic growth expands the extant literature. Studies that dealt with IFRS impacts mostly fixate on the accounting benefits of IFRS adoption to institutional investors and fail to capture the commensurate impact of IFRS adoption on macroeconomic indicators. This little attention is because prior researchers suggest IFRS adoption is important in shaping financial reporting characteristics which provide useful information to the prime users of financial reports. Also, separating the study’s countries into developed and developing countries would help delineate the impact of IFRS adoption on economic growth based on the stage of development.

IFRS and value relevance: evidence based on Canadian adoption

2016 ◽  
Vol 12 (2) ◽  
pp. 136-160 ◽  
Author(s):  
Oliver N. Okafor ◽  
Mark Anderson ◽  
Hussein Warsame
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Information ◽  
Sensitivity Analyses ◽  
Evidence Based ◽  
Content Type ◽  
Ifrs Adoption ◽  
The Us ◽  
Us Gaap

Purpose – The purpose of this paper is to investigate whether financial information prepared and disclosed under International Financial Reporting Standards (IFRS) has incremental value relevance vs information prepared under generally accepted accounting principles (GAAP) in Canada. Design/methodology/approach – The authors employ a difference in differences methodology and estimate value relevance using: first, the adjusted R2 of regressions of stock price on book value and earnings; second, the adjusted R2 of regressions of stock returns on earnings and changes in earnings; and third, a time series incremental association return estimation. The authors use multiple models including a model similar to the Ohlson (1995) model and a modified Balachandran and Mohanram (2011) model to investigate value relevance in the period 2008-2013. Findings – The authors provide empirical evidence, based on unique Canadian environment, that accounting information prepared and disclosed under IFRS exhibits higher price and returns value relevance than accounting information prepared previously under local GAAP. Sensitivity analyses and yearly trends regressions produce collaborating evidence. Originality/value – The study provides early empirical evidence that value relevance increases in mandatory IFRS adoption, based on unique Canadian adoption. The Canadian adoption is unique because Canada: first, is the first G7 non-European country to adopt IFRS; second, had pursued a dual strategy of harmonizing with the US GAAP while supporting IFRS convergence; third, provided information environment that mitigates the problems associated with measuring the effects of IFRS adoption in the European countries where IFRS or its predecessor – international accounting standards – had permeated the reporting environment prior to the mandatory adoption in 2005; and fourth, allowed firms listed on the US exchanges to continue to use or adopt the US GAAP for financial reporting and thus, provided a group of benchmark firms drawn from the same social-political and economic environment as the treatment firms. The study clarifies prior inconsistent results from European samples.

scholarly journals The Impact of IFRS Adoption on the Value Relevance of Accounting Information: Evidence from the Insurance Sector

2018 ◽  
Vol 13 (4) ◽  
pp. 138
Author(s):  
Ali A. Alnodel
Keyword(s):  
Stock Market ◽  
Financial Reporting ◽  
Value Relevance ◽  
Insurance Industry ◽  
Evaluation Model ◽  
Accounting Information ◽  
Insurance Companies ◽  
Book Value ◽  
Ifrs Adoption ◽  
The Impact

This paper aims to investigate whether the adoption of International Financial Reporting Standards (IFRS) increases the value relevance of accounting information for insurance firms listed in the Saudi stock market. The study employs the Ohlson model (1995) and the Easton–Harris valuation model (1991) in order to examine the association among stock market value and book value and earnings per share. The data was collected for 21 insurance companies listed in the Saudi stock market during the period 2007–2014, which covered pre- / post-IFRS periods. The results reveal that the book value of equity becomes less value relevant whereas earnings are more value relevant. Further analysis suggests that the increase in the value relevance of accounting information is positively influenced by companies’ attributes, especially profitability and size rather than IFRS adoption. These results highlight the importance of institutional factors in the determination of the value relevance of accounting information in emerging stock markets. These results also expand IFRS research through a consideration of the insurance industry, which is more vulnerable to the accounting evaluation model.

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