Capital market effects of adoption of IFRS

<p>This thesis examines the impact of adoption of IFRS (International Financial Reporting Standards) on two aspects of the operation of capital markets. Firstly, the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital. Secondly, the impact of adoption of IFRS on seasoned equity offering (SEO) underperformance. To examine the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital, the study used meta-analysis of empirical studies published since 2000. Meta-analysis provides an objective view of the empirical results, in contrast to narrative reviews, which offer subjective conclusions. From meta-analysis of 55 empirical studies with 1,259 effect sizes, the study finds that IFRS adoption has increased financial reporting comparability, market liquidity, and reduced cost of equity. For cost of debt, a decrease is observed only for voluntary adoption. The meta-regression analysis shows how the results differ across mandatory and voluntary adoption of IFRS and that the measurement choices, type of control variables, study design, and strength of empirical results explain the variation in the observed effect of adoption of IFRS. To examine the impact of adoption of IFRS on SEO underperformance the study analyses a large sample of SEOs from 51 countries over the period 1992-2017. Given that the empirical literature on SEOs has established that information asymmetry contributes to SEO underperformance, it is important to assess whether adoption of IFRS has reduced the uncertainties surrounding SEOs and, thus, subsequent underperformance. The study employs a control sample of non-IFRS adoption countries and applies a difference-in-difference (DiD) design to test for the incremental change for IFRS adoption countries over non-IFRS adoption countries. The study finds that SEO underperformance reduces for IFRS adopters relative to non-IFRS adopters in the post-adoption period. The reduction in SEO underperformance is influenced by increased disclosure, increased comparability, and number of accounting changes. The study also finds that the impact of adoption of IFRS on SEO underperformance exists only for firms in countries with strong enforcement, and is conditional on the implementation credibility of countries. The findings are robust to the application of a different measure of SEO underperformance. Overall, the study suggests that IFRS has had a positive impact on capital markets. However, increased disclosure, comparability, and credible implementation play important roles in realising the benefits of adoption of IFRS. Thus, policymakers of weak enforcement countries are encouraged to strengthen their institutional environment in order to reap the benefits that adoption of IFRS can provide to their capital market.</p>

Capital market effects of adoption of IFRS

<p>This thesis examines the impact of adoption of IFRS (International Financial Reporting Standards) on two aspects of the operation of capital markets. Firstly, the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital. Secondly, the impact of adoption of IFRS on seasoned equity offering (SEO) underperformance. To examine the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital, the study used meta-analysis of empirical studies published since 2000. Meta-analysis provides an objective view of the empirical results, in contrast to narrative reviews, which offer subjective conclusions. From meta-analysis of 55 empirical studies with 1,259 effect sizes, the study finds that IFRS adoption has increased financial reporting comparability, market liquidity, and reduced cost of equity. For cost of debt, a decrease is observed only for voluntary adoption. The meta-regression analysis shows how the results differ across mandatory and voluntary adoption of IFRS and that the measurement choices, type of control variables, study design, and strength of empirical results explain the variation in the observed effect of adoption of IFRS. To examine the impact of adoption of IFRS on SEO underperformance the study analyses a large sample of SEOs from 51 countries over the period 1992-2017. Given that the empirical literature on SEOs has established that information asymmetry contributes to SEO underperformance, it is important to assess whether adoption of IFRS has reduced the uncertainties surrounding SEOs and, thus, subsequent underperformance. The study employs a control sample of non-IFRS adoption countries and applies a difference-in-difference (DiD) design to test for the incremental change for IFRS adoption countries over non-IFRS adoption countries. The study finds that SEO underperformance reduces for IFRS adopters relative to non-IFRS adopters in the post-adoption period. The reduction in SEO underperformance is influenced by increased disclosure, increased comparability, and number of accounting changes. The study also finds that the impact of adoption of IFRS on SEO underperformance exists only for firms in countries with strong enforcement, and is conditional on the implementation credibility of countries. The findings are robust to the application of a different measure of SEO underperformance. Overall, the study suggests that IFRS has had a positive impact on capital markets. However, increased disclosure, comparability, and credible implementation play important roles in realising the benefits of adoption of IFRS. Thus, policymakers of weak enforcement countries are encouraged to strengthen their institutional environment in order to reap the benefits that adoption of IFRS can provide to their capital market.</p>

Perceptions on voluntary adoption and certification of food safety management system HACCP: a case study of A&B staff in a five-star hotel in BrazilPerceptions on voluntary adoption and certification of food safety management system HACCP: a case study of A&B staff in a five-star hotel in Brazil

This study uses the in-depth case study method to evaluate the perceptions of managers and handlers of the Food and Beverage (A&B) sector of a five-star hotel that has as a differential the certification by a Food Safety Management System (FSMS), based on Hazard Analysis and Critical Control Points (HACCP), for some of the products of its breakfast buffet. The data were collected through semi-structured interviews with 6 managers from the A&B sector and a survey with their teams of food handlers (N = 105), being later analyzed by Content Analysis, supported by Atlas.tiÔ v.5.5 and descriptive statistics supported by SPSSÔ v. 14.0, respectively. The questionnaire used was previously tested, through consultation with experts and pre-test with a group of 20 food handlers from another hotel in the same hotel chain and with similar characteristics. The results obtained show considerable contrast in the socioeconomic classes and education of the employees of both groups, which may influence their overall perceptions of food safety. And, although both groups agree that an FSMS based on a voluntary and certified HACCP system can represent a competitive advantage for the hotel, most food handlers do not seem to perceive certified products differently in practice. Finally, the study points out the need to better communicate food safety certification in hotels in order to make it tangible, transferring added value to the business.

Adoption of environmental standards and a lack of awareness: evidence from the food and beverage industry in Vietnam

Voluntary approaches to environmental policy can contribute to stemming environmental degradation in developing countries with weak institutions. We evaluate the role of a lack of awareness of a law in explaining the voluntary adoption of environmental certification by small and medium enterprises (SMEs) in the food and beverage industry in Vietnam. We find that firms, where owners or managers were unaware of the law were 38 percentage points less likely to receive environmental certification. Moreover, this effect is larger for firms that exported, had internet access or paid bribes, and it is weaker for household enterprises. Our results suggest that increasing legal awareness can weaken informational constraints for SMEs, where weak institutions and a lack of information often hamper the uptake of environmental policy initiatives.

232The Impact of Australasian Voluntary Front of Pack Nutrition Labelling on Packaged Food Reformulation

Background Front-of-pack nutrition labelling (FoPL) of packaged foods can promote healthier diets. Australia & New Zealand (NZ) adopted the voluntary Health Star Rating (HSR) scheme in 2014. We studied the impact of voluntary adoption of HSR on food reformulation overall, and for more- versus less-healthy foods. Methods Annual nutrition information panel data was collected for non-seasonal packaged foods sold in major supermarkets in Auckland from 2013-19, and Sydney from 2014-18. We used difference-in-differences to estimate reformulation associated with HSR adoption. Results Healthier products adopted HSR more than unhealthy products: 35% of products that achieved four or more stars displayed the label compared to 15% of products that achieved two stars or less. Products that adopted HSR were 6.5% & 10.7% more likely to increase their rating by ≥ 0.5 stars in Australia and NZ, respectively. Labelled products showed a -4.2% [95% CI -6.5% to -1.9%] relative decline in sodium content in NZ, but there was no sodium change in Australia. There was a -2.3% [-3.7% to -1.0 %] change in sugar content in NZ and a -1.1% [-2.2% to 0.0%] difference in Australia. Initially unhealthy products showed larger reformulation when adopting HSR than healthier products. Conclusions Overall, introduction of HSR had a small effect on product reformulation. The voluntary nature of the HSR program lowers effectiveness because labels were mostly placed on already healthy products. These already healthy products had limited scope for reformulation. Key messages HSR adoption by unhealthy products should be incentivized, or mandated, by governments to maximise reformulation

Frontiers: Can an Artificial Intelligence Algorithm Mitigate Racial Economic Inequality? An Analysis in the Context of Airbnb

We study the effect of Airbnb’s smart-pricing algorithm on the racial disparity in the daily revenue earned by Airbnb hosts. Our empirical strategy exploits Airbnb’s introduction of the algorithm and its voluntary adoption by hosts as a quasinatural experiment. Among those who adopted the algorithm, the average nightly rate decreased by 5.7%, but average daily revenue increased by 8.6%. Before Airbnb introduced the algorithm, White hosts earned $12.16 more in daily revenue than Black hosts, controlling for observed characteristics of the hosts, properties, and locations. Conditional on its adoption, the revenue gap between White and Black hosts decreased by 71.3%. However, Black hosts were significantly less likely than White hosts to adopt the algorithm, so at the population level, the revenue gap increased after the introduction of the algorithm. We show that the algorithm’s price recommendations are not affected by the host’s race—but we argue that the algorithm’s race blindness may lead to pricing that is suboptimal and more so for Black hosts than for White hosts. We also show that the algorithm’s effectiveness at mitigating the Airbnb revenue gap is limited by the low rate of algorithm adoption among Black hosts. We offer recommendations with which policy makers and Airbnb may advance smart-pricing algorithms in mitigating racial economic disparities.

Stock market reactions to voluntary integrated reporting

Purpose This study aims to examine the impact of voluntary adoption of integrated reporting on the stock prices of firms in Japan. Design/methodology/approach The event study methodology was used to analyze the stock market reactions to voluntary integrated report (IR) publication. Abnormal returns were estimated for 1,602 observations of 490 firms publishing IRs in Japan using the market model. The t-test, the Boehmer et al., 1991 test and the generalized sign test examined the significance of the cumulative average abnormal returns (CAARs). Findings The study reveals that the stock market reacts positively to voluntary IR publication by firms, especially in 2019 and 2015. Additionally, it reveals a tendency for higher CAARs around IR publication dates than around corporate social responsibility report publication dates, especially in 2016 and 2015. Research limitations/implications The limitations of this study include the possibility of self-selection bias and omitted variable bias. Practical implications This study suggests that firms can earn higher abnormal returns in the stock market through environmental, social and governance (ESG) disclosure in IRs, corroborating the recently rising investor interest in voluntary integrated reporting in Japan. Originality/value This study contributes to the literature on the value relevance of voluntary adoption of integrated reporting by providing evidence of firms achieving significantly positive abnormal returns around voluntary IR publication dates. There is no published analysis on this topic using multitudes of sample firms using the event study methodology.

Voluntary adoption of AAOIFI disclosure standards for takaful operators: the role of governance

Purpose This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure Standards by Islamic insurance (takaful) operators in the Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions. Design/methodology/approach This study uses a sample of 44 takaful operators in the SEA and the GCC regions. While corporate governance (CG) strength is measured by the use of the frequently examined variables of the board of directors and audit committee, Shari’ah governance strength is measured by the characteristics of the Shari’ah Supervisory Board (SSB). Content analysis is used to extract disclosure items from the 2014 annual reports. Agency theory, stakeholder theory and political economy theory are argued to support the hypotheses. Findings The results show that CG strength has a positive and significant effect on the voluntary adoption of AAOIFI Disclosure Standards by takaful operators, indicating that CG plays an important role in the disclosure of information in the annual reports of takaful operators. However, the results show a lack of association between SSB strength and voluntary adoption of AAOIFI Disclosure Standards. Our results suggest that the SSBs may not be as involved as the other CG mechanisms (such as a board of directors and audit committees) in reviewing financial reports. On another note, the level of the political right and civil liberties has a negative and significant effect on the voluntary adoption of AAOIFI Disclosure Standards, providing an indication that stakeholders in a community with greater freedom tend to be more active in pressuring takaful operators to provide more information to justify their existence in the community. Similar to SSB strength, the legal system is also found to have no significant association with the voluntary adoption of the AAOIFI disclosure standards. Practical implications This study provides stakeholders with a tool to evaluate the effectiveness of the governance role in increasing the transparency of takaful operators by examining the governance factors using a self-constructed disclosure index. Originality/value Our study is among the first to provide an in-depth analysis of voluntary adoption of AAOIFI Disclosure Standards for takaful operators in these two regions; therefore, this study has implications for regulators and standard setters. The findings of this study are expected to provide information to regulators and standard setters on the role of governance in improving the transparency of takaful operators.