Financial performance of selected publicly listed corporations and the extent of compliance with IFRS: A test of Ross' signaling theory

College

Ramon V. Del Rosario College of Business

Department/Unit

Accountancy

Document Type

Article

Source Title

Journal of International Management Studies

Volume

10

Issue

3

First Page

68

Last Page

78

Publication Date

2010

Abstract

This study focused on how compliance with International Financial Reporting Standards on Balance Sheet and Income statement is related with and has a significant effect on the financial performance of publicly listed companies namely: (a) Tobin's Q; (b) Return on Asset; (c) Return on Equity; and (d) Basic Earnings per share. Using the outcome of the compliance audit output in 2007, this study covered 100 publicly listed corporations from different Industries in the Philippines. The compliance audit output was used by the authors to calculate the financial statement disclosure index using a dichotomous procedure to score each of the company indices.

Using multiple regression analysis, the authors regressed each of financial performance indicator, i.e. Tobin's Q, Return on Asset, Return on Equity, and Basic Earnings per share, against Balance Sheet index and Income Statement index, the latter being the main components of the disclosure index that capture the IFRS requirements. The two (2) indices also served as proxy variables to test whether Ross' signaling theory can be validated or not in the Philippine equity market. None of the indices exert a significant effect on the financial variables cited based on the computed t-statistics whose p-values are greater than the level of significance (α = 0.05).

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Disciplines

Accounting

Keywords

Financial statements—Standards; Financial disclosure—Philippines

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