Victoria University

Capital market effects of adoption of IFRS

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dc.contributor.advisor van Zijl, Tony
dc.contributor.advisor Houqe, Noor Opare, Solomon 2020-05-29T03:00:47Z 2020-05-29T03:00:47Z 2020 2020
dc.description.abstract 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. en_NZ
dc.language.iso en
dc.publisher Victoria University of Wellington en_NZ
dc.subject Cost of debt en_NZ
dc.subject Cost of equity en_NZ
dc.subject Enforcement en_NZ
dc.subject Financial reporting comparability en_NZ
dc.subject IFRS adoption en_NZ
dc.subject Market liquidity en_NZ
dc.subject Meta-analysis en_NZ
dc.subject Seasoned equity offering en_NZ
dc.subject SEO underperformance en_NZ
dc.title Capital market effects of adoption of IFRS en_NZ
dc.type Text en_NZ
vuwschema.contributor.unit School of Accounting and Commercial Law en_NZ
vuwschema.type.vuw Awarded Doctoral Thesis en_NZ Accounting en_NZ Victoria University of Wellington en_NZ Doctoral en_NZ Doctor of Philosophy en_NZ
dc.rights.license Author Retains Copyright en_NZ 2020-03-25T07:01:35Z
vuwschema.subject.anzsrcfor 150103 Financial Accounting en_NZ
vuwschema.subject.anzsrcfor 150104 International Accounting en_NZ
vuwschema.subject.anzsrcfor 150101 Accounting Theory and Standards en_NZ
vuwschema.subject.anzsrcseo 970115 Expanding Knowledge in Commerce, Management, Tourism and Services en_NZ
vuwschema.subject.anzsrctoa 1 PURE BASIC RESEARCH en_NZ

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