Who Benefits From IFRS Convergence in China?

We study the ex ante stock market reactions to events leading up to China’s convergence to International Financial Reporting Standards (IFRS). The literature consistently shows that the benefits of mandatory IFRS convergence are concentrated in countries with stronger legal enforcement and investor protection. Given that these institutional characteristics are weaker in China relative to more developed Western economies, whether mandating IFRS will benefit the Chinese capital market is an interesting and important, but unanswered question. We find that the Chinese stock market reacts favorably to events leading up to IFRS convergence, and this effect is more pronounced among firms with greater dependence on external capital. This result suggests the market anticipates that such firms will benefit more from IFRS convergence, possibly because of improved financial reporting quality and access to external financing. Additional tests confirm that the value relevance of accounting numbers for these firms is higher following IFRS convergence.

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Market Reaction to the Adoption of IFRS in Europe

The Accounting Review ◽

10.2308/accr.2010.85.1.31 ◽

2010 ◽

Vol 85 (1) ◽

pp. 31-61 ◽

Cited By ~ 451

Author(s):

Christopher S. Armstrong ◽

Mary E. Barth ◽

Alan D. Jagolinzer ◽

Edward J. Riedl

Keyword(s):

Information Asymmetry ◽

Positive Reaction ◽

Financial Reporting ◽

Information Quality ◽

Reporting Standards ◽

High Quality ◽

Market Reactions ◽

Financial Reporting Standards ◽

Ifrs Adoption ◽

Stock Market Reactions

ABSTRACT: This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone toward financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced for banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption.

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Commentary on the Enigma of Chinese Performance: Do Chinese Investors’ Reactions to Merger Announcements Accurately Reflect Prospects for Success?

Management and Organization Review ◽

10.1017/mor.2016.11 ◽

2016 ◽

Vol 12 (2) ◽

pp. 249-257 ◽

Cited By ~ 5

Author(s):

Michael N. Young

Keyword(s):

United States ◽

Stock Market ◽

Organizational Development ◽

The United States ◽

Chinese Stock Market ◽

Short Term ◽

Market Reactions ◽

Event Study Method ◽

Stock Market Reactions ◽

Merger Announcements

Although McCarthy, Dolfsma, and Weitzel (2016) cover much ground in their study, in this commentary I focus on alternative explanations for the empirical results indicating that Chinese acquirers outperformed acquirers from other countries – particularly acquirers from the United States. First, based on research I have done with colleagues (e.g., Chen & Young, 2010; Young & McGuinness, 2001) and that of a doctoral student (Tang, 2016), I suggest that comparison of Chinese stock market reactions to merger announcements with stock market reactions to merger announcements from more mature markets, such as the United States, may create some misleading results. The Event Study Method (ESM) used in this study is a measure of investors’ short-term reactions to unanticipated events and it assumes that investors are capable of accurately evaluating such events (MacKinlay, 1997; McWilliams & Siegel, 1997). I suggest that, given the relative newness of Chinese stock markets, Chinese investors may have reacted more positively to merger announcements regardless of the mergers’ prospects for success. Second, similar to Shapiro and Li (2016), I suggest that stages of industry and organizational development better explain the actual motivation and success of Chinese acquirers than does a general theory of culture or corporate governance traditions.

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An Empirical Evidence of the Value Relevance and Timeliness of Financial Reports in the Post Adoption of IFRS in Nigeria

The Journal of Management Theory and Practice (JMTP) ◽

10.37231/jmtp.2021.2.1.72 ◽

2021 ◽

Vol 2 (1) ◽

pp. 16-25

Author(s):

Saheed Ademola Lateef ◽

Norfadzilah Rashid ◽

Johnson Kolawole Olowookere ◽

Abdullahi Bala Ado

Keyword(s):

Financial Reporting ◽

Value Relevance ◽

Stock Exchange ◽

Reporting Quality ◽

Theory And Practice ◽

Financial Reporting Quality ◽

Reporting Standards ◽

Financial Reports ◽

Financial Reporting Standards ◽

Ifrs Adoption

The emergencies of the globalization of accounting standards and other critical issue have been reported to reduce the cost of enhancing comparability, understandability, and producing supplementary information, and analysis of the accounting reports. This allowed many developing nations who do not want to be left behind to take a cue from the world's major economies to meet the international financial reporting standards (IFRS) that Nigeria has taken measures to converge equally. The study examines the effect of IFRS adoption on financial reporting quality of listed non-financial companies in the Nigerian stock exchange. Particularly, in the area of value relevance and timely loss recognition. The study used 63 non-financial companies’ annual reports listed on the Nigerian Stock Exchange (NSE) for the period of 2008 to 2018 (i.e., 5years pre-adoption and 5years post adoption). Multiple linear regression was used in analyzing the collected data via STATA software. The result shows a significant increase in the value relevance of financial reports after IFRS adoption. The study also showed that the identification of significant losses increased in the post-IFRS adoption era. Based on the result, the study suggests that the relationship between accounting measures on IFRS adoption and financial reporting quality indicates that both foreign and local investors can predict the future of market value of individual securities. Therefore, investor receives considerable information by knowing the price information on time that shows more value relevant. Finally, this study contributed to the theory and practice, as well as direction for further studies related to the financial reporting standards and the reporting quality.

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Accounting Convergence, Mandatory Adoption of IFRS, and Accounting Quality

Handbook of Research on Institutional, Economic, and Social Impacts of Globalization and Liberalization - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-4459-4.ch033 ◽

2021 ◽

pp. 605-627

Author(s):

Sinem Ates

Keyword(s):

Financial Reporting ◽

Value Relevance ◽

Cultural Factors ◽

Institutional Factors ◽

Accounting Quality ◽

Listed Firms ◽

Financial Reporting Standards ◽

Ifrs Adoption ◽

Legal Enforcement ◽

Mandatory Adoption

This chapter aims to investigate whether the mandatory adoption of international financial reporting standards (IFRS) leads to an increase in the accounting quality measured by value relevance and the role of the national institutional factors, namely development of the capital market, legal enforcement, cultural factors, legal systems, and book-tax conformity, in the change in value relevance after IFRS adoption. Towards this end, the price and financial data of listed firms from eleven EU countries for 15 years were examined by panel data methods. The results of this study indicate that mandatory adoption of IFRS leads to an increase in the value relevance of EPS however it has not a significant effect on the value relevance of BVPS. It is also found that, among the national institutional factors, legal enforcement, cultural factors, and book-tax conformity have a significant effect on the change in value relevance after IFRS adoption.

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Stock market reaction, financial reporting quality and International Financial Reporting Standards (IFRS) convergence of listed firms in China

Global Business and Economics Review ◽

10.1504/gber.2015.072495 ◽

2015 ◽

Vol 17 (4) ◽

pp. 399 ◽

Cited By ~ 1

Author(s):

Matthias Nnadi

Keyword(s):

Stock Market ◽

Financial Reporting ◽

Market Reaction ◽

Reporting Quality ◽

Financial Reporting Quality ◽

International Financial Reporting Standards ◽

Reporting Standards ◽

Listed Firms ◽

Financial Reporting Standards ◽

Stock Market Reaction

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IFRS Adoption and Financial Reporting Quality: A Review of Evidences in Different Jurisdictions

International Letters of Social and Humanistic Sciences ◽

10.18052/www.scipress.com/ilshs.69.93 ◽

2016 ◽

Vol 69 ◽

pp. 93-106

Author(s):

Habeeb Mohamed Nijam ◽

Athambawa Jahfer

Keyword(s):

Financial Reporting ◽

Value Relevance ◽

Reporting Quality ◽

Economic Consequences ◽

Financial Statement ◽

Financial Reporting Quality ◽

Book Value ◽

Financial Reporting Standards ◽

Ifrs Adoption

Conventional and commonly held wisdom with respect to the adoption of International Financial Reporting Standards (IFRS) is that they lead to improved financial reporting quality and comparability and thereby favorable economic consequences. There are however contradicting evidences disproving this conventional wisdom or rejecting its gross generalization over the entire jurisdictions harmonizing on IFRS. Driven by this fact, quests for knowledge about the dynamics and contexts that lead to differential effects of IFRS get momentum. In an attempt to explore the insight into the effects of international accounting harmonization by way of IFRS adoption, this paper reviews selected literatures on the consequences of IFRS adoption. This review discusses some empirical evidences that have been reported in various countries that include Europe, USA, United Kingdom, Germany, Spain, Norway, Greece, Poland, Belgian, France, Italian, Turkey, United Arab Emirates (UAE), Kuwait, Jordan, China, Malaysia, Australia, Hong Kong, New Zealand, Kenya and Nigeria. Our review focuses on the aspects of value relevance, disclosure quality, cost of capital, earning management and financial statement impact due to the IFRS adoption. This review reveals that the economic consequences of IFRS adoption is significantly different though its impact reported to be positive in majority of cases. There are also notable number of studies that report indifferent and or negative effects of IFRS adoption. When IFRS studies report mixed evidence with respect to value relevance of book value of equity and earing, book value of equity supersedes the earning parameters. IFRS are found to supersede many other domestic financial reporting standards in terms of amount and the quality of disclosures in financial statement. This review also obtains that IFRS’s impact on the reduction of cost of capital depends on financial reporting incentives, law enforcement, types of legal systems and various other country-specific and capital market characteristics. Further, though there are some evidences to the contrary, the quality of earnings reported under IFRS has been established to be superior to other local standards.

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