IFRS adoption, financial reporting quality and cost of capital: a life cycle perspective

2019 ◽  
Vol 31 (3) ◽  
pp. 497-522 ◽  
Author(s):  
Ahsan Habib ◽  
Md. Borhan Uddin Bhuiyan ◽  
Mostafa Monzur Hasan
Keyword(s):  
Life Cycle ◽  
Financial Reporting ◽  
Cost Of Capital ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Cost Of Equity ◽  
Content Type ◽  
Ifrs Adoption ◽  
Life Cycle Stages ◽  
The Impact

Purpose This paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality and cost of equity. The paper further investigates whether such association varies at different life cycle stages. Design/methodology/approach This paper follows the methodologies of DeAngelo et al. (2006) and Dickinson (2011) to develop proxies for the firms’ stages in the life cycle. Findings Using both pre- and post-IFRS adoption period for Australian listed companies, the paper finds that financial reporting quality reduced and cost of equity increased because of the adoption of IFRS. The paper further evidences that financial reporting quality in the post-IFRS period increased cost of equity. Finally, the paper finds that mature firms produce a better quality of earnings, which result in lower cost of capital. The results indicate that a mature firm was benefited because of the adoption of IFRS. Originality/value The finding of this research is useful to the regulators and practitioners to understand the widespread benefit of IFRS adoption.

scholarly journals A literature review on the impact of IAS/IFRS and regulations on quality of financial reporting

2016 ◽  
Vol 6 (4) ◽  
pp. 102-114 ◽  
Author(s):  
Newman Wadesango ◽  
Edmore Tasa ◽  
Khazamula Milondzo ◽  
Ongayi Vongai Wadesango
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Statements ◽  
Conclusive Evidence ◽  
Financial Reporting Quality ◽  
International Accounting Standards ◽  
Ifrs Adoption ◽  
The Impact

The International Accounting Standards Board (IASB) in its objectives and preamble, presume that IFRS adoption and perceived compliance to regulatory framework is associated with increased financial reporting quality. Based on these assumptions, this desktop study reviewed several documents to determine whether the IFRS adoption has led to increased financial reporting quality in Zimbabwe. The researchers reviewed literature on how the IAS/IFRS and regulations affect the financial reporting quality of listed companies. The factors around IFRS adoption were identified (mandatory, voluntary and convergence) and discussed in relation to the financial reporting quality. Evidence from previous studies conducted in line with this same issue shows that there is no conclusive evidence on how IFRS and regulations affect the financial reporting quality. Issues to be addressed in further studies include the importance of financial statements prepared under IFRS framework and the importance of compliance with accounting and auditing requirements.

Effects of leadership and accounting capacity on accountability through the quality of financial reporting by public organisations in Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yen Thi Tran ◽  
Nguyen Phong Nguyen ◽  
Trang Cam Hoang
Keyword(s):  
Public Sector ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Equation Modeling ◽  
Content Type ◽  
Research Results ◽  
Public Organisations ◽  
The Impact

Purpose By drawing on the institutional theory and contingency theory, this study aims to examine the effects of leadership and accounting capacity on the quality of financial reporting and accountability of public organisations in Vietnam. Furthermore, this paper is to determine the impact of financial reporting quality on accountability. Design/methodology/approach The research model and hypotheses have been tested by partial least squares structural equation modeling, with 177 survey samples obtained from accountants and managers working in the public sector in Vietnam. Findings The research results indicate that leadership and accounting capacity have a positive effect on financial reporting quality; leadership and accounting capacity positively influence accountability; and the quality of financial reporting has a positive impact on accountability. Research limitations/implications The research results provide empirical evidence of the direct impact of leadership and accounting capacity on financial reporting quality and accountability of public organisations in a developing country. Moreover, the current work also provides important evidence for the impact of financial reporting quality on accountability. Practical implications Public sector organisations must realise that leadership and accounting capacity play a vital role in the accounting reform process. Public institutions likewise need to pay attention to develop accounting capacity and promote leadership. Moreover, the results respond to the continuing call for increased citizen trust in public organisations. Originality/value To the best of the authors’ knowledge, this study is the first to examine the chain from leadership, accounting capacity, financial reporting quality and accountability in the context of public sector organisations in an Asian transition market.

Financial reporting quality, family ownership, and investment efficiency

2019 ◽  
Vol 45 (4) ◽  
pp. 513-535 ◽  
Author(s):  
Faisal Shahzad ◽  
Ijaz Ur Rehman ◽  
Sisira Colombage ◽  
Faisal Nawaz
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Emerging Market ◽  
Reporting Quality ◽  
Least Square ◽  
Financial Reporting Quality ◽  
Family Ownership ◽  
Investment Efficiency ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to empirically investigate the impact of two monitoring mechanisms: family ownership (FO) and financial reporting quality (FRQ) on investment efficiency (IE) over the period of 2007–2014 for listed firms on the Pakistan Stock Exchange. Design/methodology/approach The authors employ two-dimensional pooled OLS cluster at the firm and year level, two-stage least square regression and feasible generalized lease square regression regression methods. Findings The findings suggest that higher FRQ and FO are associated with higher IE. Further, the authors report that higher FRQ and FO mitigate over- and under-investment. The impact of FRQ on IE is stronger (weaker) for family-controlled businesses. The results for these particular estimates are robust for alternative estimation techniques and measures of FRQ and FO. Originality/value The study draws on both agency and behavioral agency theories and therefore contributes to the literature in the following ways. First, the authors examine a relationship between FRQ and IE. Second, the authors test the impact of FO on IE. Third, the authors test the moderating impact of FO on the relationship between FRQ and the IE of family and non-family firms in relatively less regulated emerging market.

Better with age: financial reporting quality in family firms

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Roberto Tommasetti ◽  
Marcelo Á. da Silva Macedo ◽  
Frederico A. Azevedo de Carvalho ◽  
Sergio Barile
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Reporting Quality ◽  
Management Control ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Family Control ◽  
A Value ◽  
The Family ◽  
The Impact

Purpose The purpose of this paper is to contribute to the literature on financial reporting quality (FRQ) within family firms (FFs), assessing whether longevity can determine a different propensity to earning management (EM) behaviors. Design/methodology/approach The sample, composed by Italian and Brazilian listed family (and non-family) firms, is segregated into old and young. For each subsample, unsigned discretionary accruals are calculated, using two different EM models. A linear regression model is then proposed, together with some robustness tests, to confirm the research hypothesis. Findings The outcome is that, within FFs, the entrenchment effect seems to be diminishing with the company’s age, up to become lower than the alignment effect. With some caveat, research also demonstrates that old FFs are more propense to supply higher FRQ than any other subsample group. Research limitations/implications The authors demonstrated that, in terms of EM decision process, FFs become virtuous just with time. More research is needed to evaluate the impact of the share and management control separately and to analyze different generation segmentation. Practical implications This paper could help non-family stakeholders, as it shows that different company types (family vs non-family), at a different stage of the life-cycle (young vs old) have a different attitude toward FRQ. On the other hand, family owners could exploit the longevity as a value driver. Originality/value This paper suggests that agency theory and socio-emotional theory are complementary in explaining the family control role in earnings management decisions. The study also contributes to the debate of FF homogeneity and on risk behavior in FFs, often portrayed as having a patient capital.

The Impact of Mandatory IFRS Adoption on Audit Fees: Theory and Evidence

2012 ◽  
Vol 87 (6) ◽  
pp. 2061-2094 ◽  
Author(s):  
Jeong-Bon Kim ◽  
Xiaohong Liu ◽  
Liu Zheng
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Audit Fees ◽  
Data Availability ◽  
Financial Reporting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Audit Fee ◽  
European Union Countries ◽  
The Impact

ABSTRACT: This study examines the impact of International Financial Reporting Standards (IFRS) adoption on audit fees. We first build an analytical audit fee model to analyze the impact on audit fees for the change in both audit complexity and financial reporting quality brought about by IFRS adoption. We then test the model's predictions using audit fee data from European Union countries that mandated IFRS adoption in 2005. We find that mandatory IFRS adoption has led to an increase in audit fees. We also find that the IFRS-related audit fee premium increases with the increase in audit complexity brought about by IFRS adoption, and decreases with the improvement in financial reporting quality arising from IFRS adoption. Finally, we find some evidence that the IFRS-related audit fee premium is lower in countries with stronger legal regimes. Our results are robust to a variety of sensitivity checks. Data availability: Data are available from public sources identified in the paper.

scholarly journals The impact of ownership structure on financial reporting quality in the east

2017 ◽  
Vol 25 (2) ◽  
pp. 178-197 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Margurite Hook
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Ownership Structure ◽  
Developing Economies ◽  
Reporting Quality ◽  
State Ownership ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Negatively Associated ◽  
The Impact

Purpose This paper aims to focus mainly on the relationship between ownership structure and earnings management of a developed and two developing economies, and is distinct from prior research. Design/methodology/approach Using a sample of firms from three countries (Australia, Malaysia and Pakistan), the detailed ownership evolutions for the period 2011-2013 were observed. Findings Overall, the authors find that in the East, ownership concentration is negatively associated with financial reporting quality. Individual ownership and group ownership were negatively associated with earnings management in Pakistan, however, not in Malaysia where the same were positively associated. Further, the result of this study indicated that state ownership is negatively associated with firm performance. Among the control variables, it was found that larger firms were negatively correlated with financial reporting, while firms with a larger board size and mature in the maneuver were coupled positively with earnings management. Originality/value The results highlight the highly individualized effects of blockholders and the need for research to further understand the mechanisms through which shareholders impact financial reporting quality.

Exploring the potentials of clawbacks to check earnings management practices and enhance financial reporting quality: perceptions from the UAE

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kahkashan Mahmood ◽  
Yasser Barghathi ◽  
Alhashmi Aboubaker Lasyoud
Keyword(s):  
Earnings Management ◽  
United Arab Emirates ◽  
Financial Reporting ◽  
Management Practices ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Firm Level ◽  
Content Type ◽  
Set Up ◽  
The Impact

Purpose For investors to wholeheartedly entrust their finances to the supposed executives, there is the need to set up policies to checkmate the excesses of such executives, hence clawback policy. This study aims to explore the perceptions of professionals regarding the impact of clawback provisions on earnings management (EM) and financial reporting quality in the context of the United Arab Emirates (UAE). Design/methodology/approach The application of a qualitative approach in an EM is of great significance in this study. For convenience, perceptions of the professionals were collected through semi-structured face-to-face interviews, internet forums and telephone conversations from which the data were initially transcribed and analyzed using thematic analysis. Findings The findings of the study indicate that clawbacks will have a significant impact on EM and financial reporting quality, and apart from this, other firm-level factors have also been supporting clawbacks. Practical implications EM has been a widespread practice; this research may potentially assist directors and regulatory bodies to comprehend factors that should be considered to reduce it. It may also provide practical insights from professionals regarding clawbacks and their bearing on EM and the quality of financial information from an emerging economy perspective. Originality/value A significant gap in the contemporary literature regarding the impact of clawback provisions on EM and financial reporting quality has been filed by this work, in the context of the UAE economy. Consequently, it provides a great insight into the effect of clawback in a business setting and how it can help checkmate the excesses of company executives.

The impact of mandatory IFRS adoption on capital markets: evidence from Korea

2018 ◽  
Vol 26 (1) ◽  
pp. 38-58 ◽  
Author(s):  
Saerona Kim ◽  
Haeyoung Ryu
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Joint Effect ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
Ifrs Adoption ◽  
The Cost ◽  
The Impact

Purpose The purpose of this paper is to examine the effects of adoption of the mandatory International Financial Reporting Standards (IFRS) on the cost of equity capital in a unique Korean setting. In Korea, individual financial statements were taken as primary financial statements. Before the adoption of IFRS, consolidated financial statements were taken as supplementary financial statements. Design/methodology/approach The authors measure the cost of equity using the average estimates from the implied cost of capital models proposed by Claus and Thomas (2001), Gebhardt et al. (2001), Easton (2004) and Ohlson and Juettner-Nauroth (2005), using it as the primary dependent variable. Mandatory IFRS adoption, the independent variable in this study, is assigned a value of 1 for the post-adoption period and 0 otherwise. Findings Using a sample of listed Korean companies during the period from 2000 to 2013, the authors find evidence of a significant reduction in the cost of equity capital in Korean listed companies after mandatory adoption of the IFRS in 2011, after controlling for a set of market variables. Originality/value This study is one of a growing body of literature on the relations between mandatory IFRS adoption and the cost of equity capital (Easley and O’Hara 2004; Covrig et al. 2007; Lambert et al. 2007; Daske et al. 2008). According to the results of this study, increased financial disclosure and enhanced information comparability, along with changes in legal and institutional enforcement, seem to have had a joint effect on the cost of equity capital, leading to a large decrease in expected equity returns.

An examination of the impact of compliance with internal audit standards on financial reporting quality

2019 ◽  
Vol 17 (3) ◽  
pp. 498-518 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Middle Eastern ◽  
Internal Audit ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact

Purpose The purpose of this study is to explore the impact of internal audit (IA) compliance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) on financial reporting quality (FRQ). Design/methodology/approach Data were gathered from 142 chief audit executive from Saudi listed companies, and also from the annual reports of the participating companies. Two proxies are used to measure FRQ, namely, discretionary accruals and accruals quality. Findings The findings reveal that companies demonstrating higher IA compliance with standards have better FRQ. They also indicate that the interaction between IA competency and its compliance with standards has an impact on FRQ. Further, the findings provide evidence that FRQ is higher in companies where IA departments have formal documentation, that is, entirely consistent with the ISPPIA. These results retain their robustness after further analysis. Originality/value In offering these findings, the paper contributes to the existing IA literature by introducing evidence from a Middle Eastern context, namely, Saudi Arabia, of the link between IA compliance with the ISPPIA and FRQ. It confirms the role of IA in FRQ, and hence, as an element of corporate governance, information, which is valuable for both the institute of internal auditors and companies.

Does IPSAS adoption reduce corruption’s level? New evidence from ODA beneficiary countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mounira Hamed-Sidhom ◽  
Yosra Hkiri ◽  
Ahmed Boussaidi
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Underdeveloped Countries ◽  
Useful Signal ◽  
The Impact ◽  
New Evidence ◽  
Important Evidence

Purpose The accounting literature suggests that the use of accounting standards with greater quality promotes the financial reporting quality and enhances accountability. This study aims to investigate the effect of the International Public Sector Accounting Standards (IPSAS) adoption, by official development assistance (ODA) beneficiary countries, on the reported level of their perceived corruption. Design/methodology/approach We investigate a sample of ODA beneficiary countries (168 country-year observations) facing rising levels of corruption. We apply a panel regression analysis for these countries during the period from 2015 to 2018. Findings The findings suggest that the IPSAS’ adoption can significantly influence the level of perceived corruption and implement important evidence about promoting transparency factor for underdeveloped countries. Originality/value This study contributes to the accounting literature by examining the theoretical and empirical insights about the impact of the of IPSAS’ adoption on the level of corruption, which can be considered as a new area of accounting literature and a useful signal for stakeholders in countries seeking adequate solutions to combat and fight corruption activities.

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