Impact of IFRS adoption to the adopting entities: Analysis using difference-in-differences estimation

Date of Publication

2019

Document Type

Master's Thesis

Degree Name

Master of Science in Accountancy

Subject Categories

Accounting

College

Ramon V. Del Rosario College of Business

Department/Unit

Accountancy

Thesis Adviser

Cynthia P. Cudia

Defense Panel Chair

Herminigilda E. Salendrez

Defense Panel Member

Alloysius Joshua S. Paril
Rina A. Abner

Abstract/Summary

Because of globalization, the need to analyze companies from different countries is becoming customary. This phenomenon contributed to the need for a global accounting standard. IASB responded to this need and made it their mission to create a high-quality globally implemented accounting standard. The outcome of their effort is the International Financial Reporting Standards (IFRS), which is expected to enhance the quality of financial reporting by enhancing financial communication and improving transparency and comparability. Hence, the adoption of IFRS is expected to reduce information asymmetry which will decrease adverse selection cost which in turn will improve the firm value of adopting entities.
The objective of this study is to examine the impact of IFRS adoption to the quality of the financial reporting of adopting entities through the observation of the impact of IFRS adoption on the firm value of the adopting entities and to determine whether the impact differs among industries and among companies with different sizes. The subject of this study are the companies belonging to Standards & Poor 100 index (US), Financial Times- Stock Exchange 100 Index (London), Philippine Stock Exchange Composite Index (PSEi) 30 (Philippines) and S&P Bombay Stock Exchange Sensitive Index 30 (India) and the period of observation is for 10 years, from 2000-2009.

To test for the poolability of the panel data, F Test for Poolability is employed and the results showed that the model to depict the Firm value of the adopting entities before and after the adoption of IFRS is not the same. Additionally, to examine the impact of IFRS adoption, Difference-in-Differences (DID) Estimation is employed. The results of the DID Estimation showed that generally, the adoption of IFRS does not have an impact on the firm value of the adopting entities. However, the results also showed that there are industries that benefited from the adoption and that firms of different sizes were affected differently.
Despite of the researcher’s best effort, this study has some limitations which call for further studies. As such, the researcher recommends the future researchers to explore the factors that might have contributed to the difference in the impact experienced by different industries in the adoption of IFRS.

Abstract Format

html

Language

English

Format

Electronic

Accession Number

CDTG008185

Keywords

Financial statements—Standards; Accounting

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Embargo Period

2-16-2025

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