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Michael Yeboah
Andras Takacs



Authors and WSEAS

Michael Yeboah
Andras Takacs


WSEAS Transactions on Business and Economics


Print ISSN: 1109-9526
E-ISSN: 2224-2899

Volume 15, 2018

Notice: As of 2014 and for the forthcoming years, the publication frequency/periodicity of WSEAS Journals is adapted to the 'continuously updated' model. What this means is that instead of being separated into issues, new papers will be added on a continuous basis, allowing a more regular flow and shorter publication times. The papers will appear in reverse order, therefore the most recent one will be on top.

Volume 15, 2018


The Effect of IFRS Adoption and Corporate Performance: Evidence of South Africa

AUTHORS: Michael Yeboah, Andras Takacs

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ABSTRACT: This study uses different econometric methods in estimating regression models to broaden our understanding of IFRS adoption on corporate performance. We provide evidence on the interactions of analyst following, managerial opportunism and information asymmetry besides macroeconomic factors on corporate performance information. The study leverages a fixed effects panel data set of 49 listed manufacturing and mining firms in South Africa, we show that BreuschLagrange Multiplier tests and the test of over-identifying restrictions were used. We used a hand-collected dataset between 2000 and 2015. The regression analysis results show that IFRS adoption had a negative significant impact on ROA, ROE, and MKTBOOK, but revealed a positive effect on earnings per share. In particular, the findings showed that interaction of IFRS and analyst following has a positive impact on returns on an asset but have a negative impact on earnings per share and market-tobook. Also, the interaction of IFRS and information asymmetry, IFRS, and managerial opportunism have a negative impact on the market-to-book and returns on equity. Integrity, government borrowings, and bankruptcy affect earnings per share positively. This study is one of the few to recognize managerial opportunism, analyst following, and information asymmetry as moderation role between IFRS adoption and corporate performance in Sub- Saharan African. The results lend credence to the fact that the interaction of IFRS adoption and information asymmetry impact on performance offer useful insights to policymakers charged with improving the reporting standards in mining and manufacturing companies in South Africa.

KEYWORDS: IFRS adoption, corporate performance proxies, macroeconomic factors, panel data, South Africa

REFERENCES:

[1] Adeuja, Y.O. (2015). A Comparative Approach to the Impact of IFRS (International Financial Reporting Standards) on the Performance of Banks in Nigeria. A Master of Science in Banking and Finance thesis, Eastern Mediterranean University, Gazimağusa, North Cyprus.

[2] Ahmed, A.S. and Duellman, S., 2011. Evidence on the role of accounting conservatism in monitoring managers’ investment decisions. Accounting & Finance, 51(3), pp.609- 633.

[3] Akintoye, I.R., 2009. Sensitivity of performance to capital structure. Banking and Finance Letters, 1(1), p.29.

[4] Badertscher, B.A., Givoly, D., Katz, S.P. and Lee, H., 2015. Private ownership and the cost of debt: Evidence from the bond market.

[5] Ball, R., Robin, A. and Sadka, G., 2008. Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism. Review of accounting studies, 13(2-3), pp.168-205.

[6] Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), pp.5-27.

[7] Ball, R., Robin, A. and Wu, J.S., 2003. Incentives versus standards: properties of accounting income in four East Asian countries. Journal of accounting and economics, 36(1- 3), pp.235-270.

[8] Baker, H.K. and Martin, G.S., 2011. Capital structure and corporate financing decisions: theory, evidence, and practice (Vol. 15). John Wiley & Sons.

[9] Barney, J.B., Ketchen Jr, D.J. and Wright, M., 2011. The future of resource-based theory: revitalization or decline? Journal of management, 37(5), pp.1299-1315.

[10] Barth, M.E., Landsman, W.R. and Lang, M.H., 2008. International accounting standards and accounting quality. Journal of accounting research, 46(3), pp.467-498.

[11] Brown, L.D. and H.N. Higgins. 2002. 'Managers' guidance of analysts: International evidence.' Working paper, Georgia State University and Worcester Polytechnic Institute.

[12] Brown, S., Hillegeist, S.A. and Lo, K., 2004. Conference calls and information asymmetry. Journal of Accounting and Economics, 37(3), pp.343-366.

[13] Breuer, A., Frumusanu, M.L., Breuer, B.L. and Manciu, A., 2012. Cash and Liquidity/Liquidity and Liquidity Ratio. Annals-Economy Series, 4, pp.78-82.

[14] Bushman, R.M. and Smith, A.J., 2001. Financial accounting information and corporate governance. Journal of accounting and Economics, 32(1-3), pp.237-333.

[15] Castillo-Merino, D., Menéndez-Plans, C. and OrgazGuerrero, N., 2014. Mandatory IFRS adoption and the cost of equity capital: Evidence from Spanish firms. Intangible Capital, 10(3).

[16] Chen, H., Tang, Q., Jiang, Y. and Lin, Z., 2010. The role of international financial reporting standards in accounting quality: Evidence from the European Union. Journal of international financial management & accounting, 21(3), pp.220-278.

[17] Chen, T.Y., Chin, C.L., Wang, S. and Yao, W.R., 2015. The effects of financial reporting on bank loan contracting in global markets: Evidence from mandatory IFRS adoption. Journal of International Accounting Research, 14(2), pp.45-81.

[18] Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia. Journal of International Accounting Research, 11(1), pp.119-146.

[19] Coffee, J., 2002. Competition among securities markets: a path dependent perspective. Corwin, S.A. and Schultz, P., 2012. A simple way to estimate bid-ask spreads from daily high and low prices. The Journal of Finance, 67(2), pp.719-760.

[20] Daske, H., Hail, L., Leuz, C. and Verdi, R., 2008. Mandatory IFRS reporting around the world: Early evidence on the economic consequences. Journal of accounting research, 46(5), pp.1085-1142.

[21] Ding, Y., Hope, O.K., Jeanjean, T. and Stolowy, H., 2007. Differences between domestic accounting standards and IAS: Measurement, determinants and implications. Journal of accounting and public policy, 26(1), pp.1-38.

[22] Doupnik, T.S. and Salter, S.B., 1995. External environment, culture, and accounting practices: a preliminary test of a general model of international accounting development.

[23] Fabozzi, F.J., Focardi, S.M. and Kolm, P.N., 2010. Quantitative equity investing: Techniques and strategies. John Wiley & Sons.

[24] Garcia Lara, J.M., García Osma, B. and Penalva, F., 2010. Accounting conservatism and firm investment efficiency.

[25] L.J. Gitman, Principles of Managerial Finance, 4th ed., Pearson Addison Wesley, Boston, 2006.

[26] Healy, P.M. and Palepu, K.G., 2001. Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1-3), pp.405-440.

[27] Hillman, A.J. and Keim, G.D., 2001. Shareholder value, stakeholder management, and social issues: What's the bottom line? Strategic management journal, pp.125-139.

[28] Ironkwe, U.I. & Oglekwu, M. (2016). International Financial Reporting Standards (IFRSs) and Corporate Performance of Listed Companies in Nigeria. IIARD International Journal of Banking and Finance Research, 2(3)

[29] Jonas, G.J. and Blanchet, J., 2000. Assessing quality of financial reporting. Accounting Horizons, 14(3), pp.353-363.

[30] Lang, M., K.V. Lins and D. Miller. 2002. 'ADRs, analysts and accuracy: Does cross listing in the U.S. improve a firm's information environment and increase market value?' Paper presented at the 2002 Journal of Accounting Research Conference.

[31] Iatridis, G. and Rouvolis, S., 2010. The post-adoption effects of the implementation of International Financial Reporting Standards in Greece. Journal of international accounting, auditing and taxation, 19(1), pp.55-65.

[32] Liener, G., 1995. Accounting standards required of global corporations by the international capital markets. Zeitschrift für Betriebswirtschaft, 65, pp.741-751.

[33] Lowe, H.D., 1967. Accounting aid for developing countries. The Accounting Review, 42(2), pp.356-360.

[34] Luez, C., 2003. IAS Versus US GAAP: Information Asymmetry–Based Evidence from Germany’s market. Journal of Accounting Research, 41(3).

[35] Lys, T. and Soo, L.G., 1995. Analysts' forecast precision as a response to competition. Journal of Accounting, Auditing & Finance, 10(4), pp.751-765.

[36] Martínez-Ferrero, J., 2014. Consequences of financial reporting quality on corporate performance. Evidence at the international level. Estudios de Economía, 41(1).

[37] McDermott, K.E., 2011. Financial reporting quality and investment in corporate social responsibility (Doctoral dissertation, PhD Thesis).

[38] Merton, R.C., 1987. A simple model of capital market equilibrium with incomplete information. The journal of finance, 42(3), pp.483-510.

[39] Nickell, S., Nicolitsas, D. and Dryden, N., 1997. What makes firms perform well? European economic review, 41(3-5), pp.783-796.

[40] Onali, E., Ginesti, G. and Vasilakis, C. (2017).How should we estimate models? Insights from European data. British Accounting Review 49, 460-473

[41] Patro, A. and Gupta, V.K., 2016. Impact of International Financial Reporting Standards on Stock Price Synchronicity for Asian Markets. Contemporary Management Research, 12(1).

[42] Sanyaolu, O.A., Iyoha, F.O., & Ojeka, S.A. (2017).International Financial Reporting Standards Adoption and Earnings of Quoted Banks in Nigeria. International Journal of Economics and Financial Issues, 7(1), 279-284.

[43] Schipper, K., 1991. Analysts' forecasts. Accounting horizons, 5(4), p.105.

[44] Seifert, B., Morris, S.A. and Bartkus, B.R., 2004. Having, giving, and getting: Slack resources, corporate philanthropy, and firm financial performance. Business & Society, 43(2), pp.135-161.

[45] Shen, G. and Rin, M., 2012. How does capital structure affect firm performance? Recent evidence from Europe countries. Retrieved from Tilburg University: http://arno. uvt. Nl/show. cgi.

[46] Shleifer, A. and Vishny, R.W., 1997. A survey of corporate governance. The journal of finance, 52(2), pp.737- 783.

[47] Tanko, M. (2012). The Effect of International Financial Reporting Standards (IFRS) Adoption on the Performance of Firms in Nigeria. Journal of Administrative and Economic Sciences, 5, (2), 133-157.

[48] Tarca, A., 2002. Achieving international harmonisation through accounting policy choice.

[49] Tu, C.J., 2012. The Impact of Stocks Index Adjustments Announcement on Earnings Management. International Journal of Economics and Finance, 4(11), p.91.

[50] Umobong, A.A. & Ibanichuka, E.A.L. (2016). IFRS Implementation and Firms Financial Performance in Nigeria. International Journal of Innovative Finance and Economics Research 4(4):50-59

[51] Umobong, A.A. (2015). IFRS adoption and firms’ performance: a comparative analysis of quoted food and beverage manufacturing firms in Nigeria. European Journal of Accounting Auditing and Finance Research, 3, (8), 77-90.

[52] Walter A. Morton (1970). The Investor Capitalization Theory of the Cost of Equity Capital. Land Economics, Vol. 46, No. 3. pp. 248-263 Published by: University of Wisconsin Press

[53] Watts, R.L. and Zimmerman, J.L., 1986. Positive Accounting Theory. Contemporary Topics in Accounting Series. Prentice-Hall International Edition Journal, ISBN, 136861717, pp.1-388.

[54] Watts, R.L., 2003. Conservatism in accounting part Explanations and implications. Accounting horizons, 17(3), pp.207-221.

[55] World Investment Report 2007 (WIR07) is the seventeenth in a series published by the United Nations Conference on Trade and Development (UNCTAD).

[56] Williamson, O., 1985. E., 1985, The Economic Institutions of Capitalism: firms, markets, relational contracting. New York.

[57] Zamri, N., Rahman, R.A. and Isa, N.S.M., 2013. The impact of leverage on real earnings management. Procedia Economics and Finance, 7, pp.86-95.

[58] Zeghal, D., Chtourou, S.M. and Fourati, Y.M., 2012. The effect of mandatory adoption of IFRS on earnings quality: Evidence from the European Union. Journal of International Accounting Resear1] Adeuja, Y.O. (2015). A Comparative Approach to the Impact of IFRS (International Financial Reporting Standards) on the Performance of Banks in Nigeria. A Master of Science in Banking and Finance thesis, Eastern Mediterranean University, Gazimağusa, North Cyprus.

[2] Ahmed, A.S. and Duellman, S., 2011. Evidence on the role of accounting conservatism in monitoring managers’ investment decisions. Accounting & Finance, 51(3), pp.609- 633.

[3] Akintoye, I.R., 2009. Sensitivity of performance to capital structure. Banking and Finance Letters, 1(1), p.29.

[4] Badertscher, B.A., Givoly, D., Katz, S.P. and Lee, H., 2015. Private ownership and the cost of debt: Evidence from the bond market.

[5] Ball, R., Robin, A. and Sadka, G., 2008. Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism. Review of accounting studies, 13(2-3), pp.168-205.

[6] Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), pp.5-27.

[7] Ball, R., Robin, A. and Wu, J.S., 2003. Incentives versus standards: properties of accounting income in four East Asian countries. Journal of accounting and economics, 36(1- 3), pp.235-270.

[8] Baker, H.K. and Martin, G.S., 2011. Capital structure and corporate financing decisions: theory, evidence, and practice (Vol. 15). John Wiley & Sons.

[9] Barney, J.B., Ketchen Jr, D.J. and Wright, M., 2011. The future of resource-based theory: revitalization or decline? Journal of management, 37(5), pp.1299-1315.

[10] Barth, M.E., Landsman, W.R. and Lang, M.H., 2008. International accounting standards and accounting quality. Journal of accounting research, 46(3), pp.467-498.

[11] Brown, L.D. and H.N. Higgins. 2002. 'Managers' guidance of analysts: International evidence.' Working paper, Georgia State University and Worcester Polytechnic Institute.

[12] Brown, S., Hillegeist, S.A. and Lo, K., 2004. Conference calls and information asymmetry. Journal of Accounting and Economics, 37(3), pp.343-366.

[13] Breuer, A., Frumusanu, M.L., Breuer, B.L. and Manciu, A., 2012. Cash and Liquidity/Liquidity and Liquidity Ratio. Annals-Economy Series, 4, pp.78-82.

[14] Bushman, R.M. and Smith, A.J., 2001. Financial accounting information and corporate governance. Journal of accounting and Economics, 32(1-3), pp.237-333.

[15] Castillo-Merino, D., Menéndez-Plans, C. and OrgazGuerrero, N., 2014. Mandatory IFRS adoption and the cost of equity capital: Evidence from Spanish firms. Intangible Capital, 10(3).

[16] Chen, H., Tang, Q., Jiang, Y. and Lin, Z., 2010. The role of international financial reporting standards in accounting quality: Evidence from the European Union. Journal of international financial management & accounting, 21(3), pp.220-278.

[17] Chen, T.Y., Chin, C.L., Wang, S. and Yao, W.R., 2015. The effects of financial reporting on bank loan contracting in global markets: Evidence from mandatory IFRS adoption. Journal of International Accounting Research, 14(2), pp.45-81.

[18] Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia. Journal of International Accounting Research, 11(1), pp.119-146.

[19] Coffee, J., 2002. Competition among securities markets: a path dependent perspective. Corwin, S.A. and Schultz, P., 2012. A simple way to estimate bid-ask spreads from daily high and low prices. The Journal of Finance, 67(2), pp.719-760.

[20] Daske, H., Hail, L., Leuz, C. and Verdi, R., 2008. Mandatory IFRS reporting around the world: Early evidence on the economic consequences. Journal of accounting research, 46(5), pp.1085-1142.

[21] Ding, Y., Hope, O.K., Jeanjean, T. and Stolowy, H., 2007. Differences between domestic accounting standards and IAS: Measurement, determinants and implications. Journal of accounting and public policy, 26(1), pp.1-38.

[22] Doupnik, T.S. and Salter, S.B., 1995. External environment, culture, and accounting practices: a preliminary test of a general model of international accounting development.

[23] Fabozzi, F.J., Focardi, S.M. and Kolm, P.N., 2010. Quantitative equity investing: Techniques and strategies. John Wiley & Sons.

[24] Garcia Lara, J.M., García Osma, B. and Penalva, F., 2010. Accounting conservatism and firm investment efficiency.

[25] L.J. Gitman, Principles of Managerial Finance, 4th ed., Pearson Addison Wesley, Boston, 2006.

[26] Healy, P.M. and Palepu, K.G., 2001. Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1-3), pp.405-440.

[27] Hillman, A.J. and Keim, G.D., 2001. Shareholder value, stakeholder management, and social issues: What's the bottom line? Strategic management journal, pp.125-139.

[28] Ironkwe, U.I. & Oglekwu, M. (2016). International Financial Reporting Standards (IFRSs) and Corporate Performance of Listed Companies in Nigeria. IIARD International Journal of Banking and Finance Research, 2(3)

[29] Jonas, G.J. and Blanchet, J., 2000. Assessing quality of financial reporting. Accounting Horizons, 14(3), pp.353-363.

[30] Lang, M., K.V. Lins and D. Miller. 2002. 'ADRs, analysts and accuracy: Does cross listing in the U.S. improve a firm's information environment and increase market value?' Paper presented at the 2002 Journal of Accounting Research Conference.

[31] Iatridis, G. and Rouvolis, S., 2010. The post-adoption effects of the implementation of International Financial Reporting Standards in Greece. Journal of international accounting, auditing and taxation, 19(1), pp.55-65.

[32] Liener, G., 1995. Accounting standards required of global corporations by the international capital markets. Zeitschrift für Betriebswirtschaft, 65, pp.741-751.

[33] Lowe, H.D., 1967. Accounting aid for developing countries. The Accounting Review, 42(2), pp.356-360.

[34] Luez, C., 2003. IAS Versus US GAAP: Information Asymmetry–Based Evidence from Germany’s market. Journal of Accounting Research, 41(3).

[35] Lys, T. and Soo, L.G., 1995. Analysts' forecast precision as a response to competition. Journal of Accounting, Auditing & Finance, 10(4), pp.751-765.

[36] Martínez-Ferrero, J., 2014. Consequences of financial reporting quality on corporate performance. Evidence at the international level. Estudios de Economía, 41(1).

[37] McDermott, K.E., 2011. Financial reporting quality and investment in corporate social responsibility (Doctoral dissertation, PhD Thesis).

[38] Merton, R.C., 1987. A simple model of capital market equilibrium with incomplete information. The journal of finance, 42(3), pp.483-510.

[39] Nickell, S., Nicolitsas, D. and Dryden, N., 1997. What makes firms perform well? European economic review, 41(3-5), pp.783-796.

[40] Onali, E., Ginesti, G. and Vasilakis, C. (2017).How should we estimate models? Insights from European data. British Accounting Review 49, 460-473

[41] Patro, A. and Gupta, V.K., 2016. Impact of International Financial Reporting Standards on Stock Price Synchronicity for Asian Markets. Contemporary Management Research, 12(1).

[42] Sanyaolu, O.A., Iyoha, F.O., & Ojeka, S.A. (2017).International Financial Reporting Standards Adoption and Earnings of Quoted Banks in Nigeria. International Journal of Economics and Financial Issues, 7(1), 279-284.

[43] Schipper, K., 1991. Analysts' forecasts. Accounting horizons, 5(4), p.105.

[44] Seifert, B., Morris, S.A. and Bartkus, B.R., 2004. Having, giving, and getting: Slack resources, corporate philanthropy, and firm financial performance. Business & Society, 43(2), pp.135-161.

[45] Shen, G. and Rin, M., 2012. How does capital structure affect firm performance? Recent evidence from Europe countries. Retrieved from Tilburg University: http://arno. uvt. Nl/show. cgi.

[46] Shleifer, A. and Vishny, R.W., 1997. A survey of corporate governance. The journal of finance, 52(2), pp.737- 783.

[47] Tanko, M. (2012). The Effect of International Financial Reporting Standards (IFRS) Adoption on the Performance of Firms in Nigeria. Journal of Administrative and Economic Sciences, 5, (2), 133-157.

[48] Tarca, A., 2002. Achieving international harmonisation through accounting policy choice.

[49] Tu, C.J., 2012. The Impact of Stocks Index Adjustments Announcement on Earnings Management. International Journal of Economics and Finance, 4(11), p.91.

[50] Umobong, A.A. & Ibanichuka, E.A.L. (2016). IFRS Implementation and Firms Financial Performance in Nigeria. International Journal of Innovative Finance and Economics Research 4(4):50-59

[51] Umobong, A.A. (2015). IFRS adoption and firms’ performance: a comparative analysis of quoted food and beverage manufacturing firms in Nigeria. European Journal of Accounting Auditing and Finance Research, 3, (8), 77-90.

[52] Walter A. Morton (1970). The Investor Capitalization Theory of the Cost of Equity Capital. Land Economics, Vol. 46, No. 3. pp. 248-263 Published by: University of Wisconsin Press

[53] Watts, R.L. and Zimmerman, J.L., 1986. Positive Accounting Theory. Contemporary Topics in Accounting Series. Prentice-Hall International Edition Journal, ISBN, 136861717, pp.1-388.

[54] Watts, R.L., 2003. Conservatism in accounting part Explanations and implications. Accounting horizons, 17(3), pp.207-221.

[55] World Investment Report 2007 (WIR07) is the seventeenth in a series published by the United Nations Conference on Trade and Development (UNCTAD).

[56] Williamson, O., 1985. E., 1985, The Economic Institutions of Capitalism: firms, markets, relational contracting. New York.

[57] Zamri, N., Rahman, R.A. and Isa, N.S.M., 2013. The impact of leverage on real earnings management. Procedia Economics and Finance, 7, pp.86-95.

[58] Zeghal, D., Chtourou, S.M. and Fourati, Y.M., 2012. The effect of mandatory adoption of IFRS on earnings quality: Evidence from the European Union. Journal of International Accounting Research, 11(2), pp.1-25ch, 11(2), pp.1-25

WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 15, 2018, Art. #48, pp. 475-487


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