Abstract

http://ssrn.com/abstract=1734753
 


 



Value Relevance of IFRS Mandatory Disclosure Requirements


Ioannis Tsalavoutas


University of Stirling - Accounting and Finance Division

Dionysia Dionysiou


University of Stirling

January 4, 2011

Journal of Applied Accounting Research, Vol. 15. Issue 1, 2014

Abstract:     
Purpose: We address recent calls for research regarding the valuation implications of mandatory disclosure requirements (cf. Hassan et al., 2009; Leuz and Wizocki, 2008; Schipper, 2007).

Design: We measure compliance with all IFRS mandatory disclosure requirements for a sample of firms. We subsequently explore whether the compliance scores (i.e. the mandatory disclosure levels) are value relevant and whether the value relevance of accounting numbers differs across high and low compliance/disclosure companies.

Findings: We find that the levels of mandatory disclosures are value relevant. Additionally, not only the relative value relevance (i.e. R2) but also the valuation coefficient of net income of high compliance companies is significantly higher than that of low-compliance companies.

Limitations: This paper is an indicative single country case study that focuses on the IFRS adoption year (2005) in the EU. It forms a new avenue for research regarding the valuation implications of mandatory disclosure requirements. It remains to future research to examine whether our findings also hold in other countries and periods.

Practical implications: These findings are expected to be particularly relevant to standard setters and regulatory bodies who are concerned about the implications of mandatory disclosure requirements (Schipper, 2007).

Originality/value: To the best of our knowledge, this is the first paper that examines the value relevance implications of IFRS mandatory disclosure requirements, focusing on European country after 2005. The findings indicate that IFRS mandatory disclosures do lead to more transparent financial statements (cf. Pownall and Schipper, 1999), mitigating concerns about companies’ fundamentals (cf. Anctil et al., 2004).

Keywords: Value relevance, compliance, IFRS, mandatory disclosures

Accepted Paper Series


Not Available For Download

Date posted: January 7, 2011 ; Last revised: April 7, 2014

Suggested Citation

Tsalavoutas, Ioannis and Dionysiou, Dionysia, Value Relevance of IFRS Mandatory Disclosure Requirements (January 4, 2011). Journal of Applied Accounting Research, Vol. 15. Issue 1, 2014. Available at SSRN: http://ssrn.com/abstract=1734753

Contact Information

Ioannis Tsalavoutas (Contact Author)
University of Stirling - Accounting and Finance Division ( email )
Stirling, Scotland FK9 4LA
United Kingdom
HOME PAGE: http://www.management.stir.ac.uk/people/accounting-and-finance/academic-staff/dr-yannis-tsalavoutas
Dionysia Dionysiou
University of Stirling ( email )
Accounting and Finance Division
Stirling, FK9 4LA
United Kingdom
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