Accounting and stock market effects of international accounting standards adoption in an emerging economy

Accounting and stock market effects of international accounting standards adoption in an emerging... This study examines the impact of the mandatory adoption of the 1997 and 2006 Egyptian accounting standards on earnings quality and firm valuation. Extant research finds that IAS-based standards have positive effects on financial statement attributes (e.g., earnings management) and capital market-related variables (e.g., firm valuation) in some countries, and negative or neutral effects in others. Research conducted in this area on emerging markets is scant, and none in Egypt, which has adopted in 1997 an IAS-based standards (later revised twice in 2002 and 2006). Using a sample of Egyptian listed firms around the time of introducing the 1997 and 2006 EAS versions, I find insignificant empirical evidence that earnings management decreases post adoption of each of the EAS versions under investigation. Additionally, I find that firm valuation (Tobin’s q) was significantly negatively affected by both EAS versions under investigation in this study. I attribute these results to the lack of compliance by financial statement preparers, improper regulatory enforcement mechanisms, the poor accounting infrastructure, and the inadequate practitioner training, claimed by prior literature. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Accounting and stock market effects of international accounting standards adoption in an emerging economy

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-010-0176-1
Publisher site
See Article on Publisher Site

Abstract

This study examines the impact of the mandatory adoption of the 1997 and 2006 Egyptian accounting standards on earnings quality and firm valuation. Extant research finds that IAS-based standards have positive effects on financial statement attributes (e.g., earnings management) and capital market-related variables (e.g., firm valuation) in some countries, and negative or neutral effects in others. Research conducted in this area on emerging markets is scant, and none in Egypt, which has adopted in 1997 an IAS-based standards (later revised twice in 2002 and 2006). Using a sample of Egyptian listed firms around the time of introducing the 1997 and 2006 EAS versions, I find insignificant empirical evidence that earnings management decreases post adoption of each of the EAS versions under investigation. Additionally, I find that firm valuation (Tobin’s q) was significantly negatively affected by both EAS versions under investigation in this study. I attribute these results to the lack of compliance by financial statement preparers, improper regulatory enforcement mechanisms, the poor accounting infrastructure, and the inadequate practitioner training, claimed by prior literature.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Apr 20, 2010

References

  • Domestic accounting standards, international accounting standards, and the predictability of earnings
    Ashbaugh, H; Pincus, M
  • The role of accruals in asymmetrically timely gain and loss recognition
    Ball, R; Shivakumar, L
  • Earnings quality at initial public offerings
    Ball, R; Shivakumar, L
  • Earnings quality following corporate acquisitions
    Barragato, AC; Markelevich, A
  • The relevance of the value relevance literature for accounting standard setting: another view
    Barth, M; Beaver, WH; Landsman, WR
  • The conservatism principle and the asymmetric timeliness of earnings
    Basu, S

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