Analysis of the contribution of IFRS to improving the relevance of financial performance measures: A comparative study with Moroccan Accounting Standards
-
Author(s)Adil LaouaneLink to ORCID Index: https://orcid.org/0009-0005-5065-2474
,
Mohamed TorraLink to ORCID Index: https://orcid.org/0000-0002-6210-5989
-
DOIhttp://dx.doi.org/10.21511/imfi.20(3).2023.21
-
Article InfoVolume 20 2023, Issue #3, pp. 251-263
- Cited by
- 390 Views
-
105 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The implementation of the international accounting framework has led to a new philosophy of estimating and valuing the financial performance of companies. In this respect, the accounting indicators derived from financial statements constitute the classic measures of performance evaluation, such as ROE, ROA, BPA, and Payout. However, their usefulness is contested in the face of market-based indicators like TSR, MVA, PBR, and dividend yield. This paper aims to assess the effect of adopting IFRS on the relevance of financial performance measures through a comparative approach with Moroccan GAAP. At the empirical level, the use of multiple regressions on panel data remains strongly solicited to test the informational relevance of these indicators. In number, there are 115 observations collected from IFRS-adopting companies and 418 observations from non-adopting companies over the period 2013–2022. The study revealed a significant impact of the adoption of IFRS on the informational relevance of accounting indicators (adjusted R2(IFRS) = 71.12% against adjusted R2(Moroccan GAAP) = 55.03%). However, this study found a less significant effect of IFRS on the degree of relevance of stock market performance indicators (adjusted R2 (IFRS) = 50.36% versus adjusted R2(Moroccan GAAP) = 63.84 %). The study also showed a significant effect of IFRS on the complementarity between accounting and stock market performance indicators to explain the total shareholder return (adjusted R2(IFRS) = 69.02% against adjusted R2(Moroccan GAAP) = 58.01%).
- Keywords
-
JEL Classification (Paper profile tab)G14, M40, M41
-
References40
-
Tables9
-
Figures0
-
- Table 1. Number of observations
- Table 2. Measurement of variables
- Table 3. Descriptive statistics according to IFRS
- Table 4. Descriptive statistics according to Moroccan GAAP
- Table 5. Correlation matrix under IFRS
- Table 6. Correlation matrix under Moroccan GAAP
- Table 7. Results of the Hausman test
- Table 8. Robustness tests
- Table 9. Main results
-
- Abdullah, W., Maruhun, E., Tarmizi, M., & Rahman, L. (2018). Mitigating earnings management: adoption of IFRS and corporate governance practices in Malaysia. International Journal of Academic Research in Business and Social Sciences, 8(2), 760-772.
- Ahmad, I. (2006). Is economic value added more associated with stock return than accounting earnings? The UK evidence. International Journal of Managerial Finance, 2(4), 343-353.
- Ahmadi, A., & Bouri, A. (2018). The accounting value relevance of earnings and book value: Tunisian banks and financial institutions. International Journal of Law and Management, 60(2), 342-354.
- Almaqtari, F., Hashed, A., & Shamim, M. (2021). Impact of corporate governance mechanism on IFRS adoption: a comparative study of Saudi Arabia, Oman, and the United Arab Emirates. Heliyon.
- Alnodel, A. A. (2018). The Impact of IFRS adoption on the value relevance of accounting information: evidence from the insurance sector. International Journal of business and Management, 5(4), 138-148.
- Amaefule, L., Onyekpere, U., & Kalu, E. (2018). International financial reporting standards and manufacturing firms’ financial performance in Nigeria: a study of selected quoted firms. International Journal of Accounting and Taxation, 6(1), 102-114.
- Bandara, S., & Falta, M. (2021). The usefulness of IFRS-compliant reports: perceptions of Sri Lankan investors and lenders. Asian Review of Accounting, ahead-of-print.
- Barneto, P., & Gregorio, G. (2011). IFRS and performance measurement. A comparative study of European banking institutions. Accounting, Economy and Society, Montpellier, France.
- Barth, M. Li, K., & McClure, C. G. (2017). Evolution in value relevance of accounting information. Stanford University Graduate School of Business Research.
- Barth, M., Landsman, W., & Lang, M. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498.
- Crepon, B., & Jacquement, N. (2010). Econometrics: methods and applications. Bruxelles: De Boeck.
- Danjou, P. (2012). Accounting standards and value creation. Revue d’économie financière, 106, 205-226.
- Daske, H., Hail, L., Leuz, C., & Verdi, R. (2013). Adopting a label: heterogeneity in the economic consequences around IAS/IFRS adoptions. Journal of Accounting Research, 51(3), 495-547.
- Do Hoon Ki, Wook Bin Leem, & Jee Hoon Yuk. (2019). The effect of IFRS adoption on the value relevance of accounting information: evidence from South Korea. Investment Management and Financial Innovations, 16(2), 78-88.
- Easton, P. D., & Harris, T. S. (1991). Earnings as an Explanatory Variable for Returns. Journal of Accounting and Economics, 29, 19-36.
- Edeigba, J., & Amenkhienan, F. (2017). The influence of IFRS adoption on corporate transparency and accountability: evidence from New Zealand, Australasian Accounting, Business and Finance Journal, 11(3), 3-19.
- Escaffre, L., & Sefsaf, R. (2010). The Additional value relevance of IFRS: a comparison between the major European markets. Crises and New Value Issues. Nice.
- Forner, C., & Sonia Sanabria, S. (2010). Post-benefit announcement drift in Spain and behavioural finance models. Revue comptable européenne, 19(4), 775-815.
- Garanina, T. A., & Kormiltseva, P. S. (2013). The effect of international financial reporting standards (IFRS) adoption on the value relevance of financial reporting: A case of Russia. Research in Accounting in Emerging Economies, Accounting in Central and Eastern Europe, 13, 27-60.
- Garza Sánchez, H. H., Cortez Alejandro, K. A., Méndez Sáenz, A. B., & Rodríguez García, M. D. P. (2017). The effect of changes in accounting standards on the quality of information: A case study applied to the Mexican real sector. Accounting and Administration, 62(3), 761-774.
- Greene, W.(2011). Econometric Analysis (7th ed.). Harlow: Pearson Education.
- Hassan, M. (2019). Analysis of effects of IFRS adoption on the comparability of financial reporting: evidence from Saudi listed companies. Journal of Emerging Issues in Economics, Finance and Banking, 8(1), 2698-2714.
- Hussein, A., & Nounou, G. (2021). The impact of internet financial reporting on Egyptian company’s performance. Journal of Financial Reporting and Accounting, 20(5), 841-865.
- Issor, Z. (2017). Corporate performance: a complex concept with multiple dimensions. Projectics/Proyéctica/Projectique, 17, 93-103.
- Jakub, S., Bartosova, V., & Kicova, E. (2015). Economic Value Added as a Measurement Tool of Financial Performance. Procedia Economics and Finance, 26, 484-489.
- Josée St-Pierreб & Benoit, L. & Hélène, B. (2005). Financial and non-financial performance indicators: complementarity or substitution? Exploratory study of manufacturing PME. XXVIe Congress of the Francophone Accounting Association. Lille, France.
- Kwon, G. (2018). Comparative value relevance of accounting information among Asian countries. Managerial Finance, 44(2), 110-126.
- Laouane, A., & Torra, M. (2021). The impact of IFRS adoption on the informational relevance of financial performance indicators of companies listed on the Casablanca BVC. International Journal of Accounting, Finance, Auditing, Management and Economics, 2(6), 100-119.
- Laouane, A., & Torra, M. (2022). The perceived impact of IFRS adoption on the quality of financial reporting by Moroccan financial actors: Structural equation modeling. International Journal of Accounting, Finance, Auditing, Management and Economics, 3(6-2), 158-176.
- Lenormand, G., & Touchais, L.(2009). Do IFRS improve the quality of financial reporting? A value relevance approach. Accounting-Control-Audit, 15(2), 145-163.
- Liu, G. et Sun, J. (2015). Did the mandatory adoption of IFRS affect the earnings quality of Canadian firms? Accounting Perspectives, 14(3), 250-275.
- Lopez, H., Jara, M. et Cabello, A. (2020). IFRS adoption and accounting conservatism in Latin America. Academia Revista Latinoamericana de Administracion, 33(3/4), 301-320.
- Madhavan, A. (2000). Market microstructure: A survey. Journal of Financial Markets, 3(3), 205-258.
- Nurunnabi, M., Jermakowicz, E., & Donker, H. (2020). Implementing IFRS in Saudi Arabia: evidence from publicly traded companies. International Journal of Accounting & Information Management, 28(2), 243-273.
- Ohlson, J.A. (1995). Earnings, Book Values, and Dividends in Equity Valuation. Contemporary Accounting Research, 11, 661-687.
- Outa, E., Ozili, P. K., & Eisenberg, P. (2017). IFRS convergence and revisions: Value relevance of accounting information quality from East Africa. Journal of Accounting in Emerging Economies, 7(3), 352-368.
- Pelucio-Grecco, M., Geron, C., Grecco, G. et Lima, J. (2014). The effect of IFRS on earnings management in Brazilian non-financial public companies. Emerging Markets Review, 21(1), 42-66.
- Saadi, T. (2007). EVA Vs. net income: What information is content in the French context? “ACCOUNTING AND THE ENVIRONMENT”, France.
- Stern, J. M., Stewart III, G. B., Chew Jr, D. H.(1996). EVA: An integrated financial management system. European Financial Management, 2(2), 223.
- Turki, H., Wali, S., Ali, Z., & Mohammed, M. (2020). IFRS and financial performance: study in the French context. International Journal of Financial Research, 11(2), 424.
-
The association between Corporate Social Responsibility Disclosure and accounting-based financial performance: a Kuwaiti evidence
Meshari Al-Hajri ,
Fawaz Al-Enezi
doi: http://dx.doi.org/10.21511/imfi.16(1).2019.01
Investment Management and Financial Innovations Volume 16, 2019 Issue #1 pp. 1-13 Views: 2437 Downloads: 267 TO CITE АНОТАЦІЯThe current study aims at extending prior accounting research on the association between Corporate Social Responsibility Disclosure (CSRD) and Corporate Financial Performance (CFP) using a sample of listed firms on Kuwait Stock Exchange (KSE) from 2011 to 2012. It conducts a regression analysis to investigate the association between CSRD and CFP, as well as investigates the impact of firm size, leverage, and industry affiliation as the key determinants suggested by prior research on the level of CSRD. The results of the present study reveal that both CFP and firm size have significant positive associations with CSRD, whereas, in contrast, firm’s leverage and firm’s industry affiliation show non-significant associations with CSRD.
-
Economic value added: The best indicator for measuring value creation or just an illusion?
Anouar Faiteh , Mohammed Rachid Aasri
doi: http://dx.doi.org/10.21511/imfi.20(1).2023.13
Investment Management and Financial Innovations Volume 20, 2023 Issue #1 pp. 138-150 Views: 922 Downloads: 371 TO CITE АНОТАЦІЯValue creation has become a very important concept in finance. To this end, value creation metrics, like market value added and economic value added have raised the question of their superiority and ability to reflect the true value of organizations, as opposed to the classic accounting indicators like ROE, ROA and EPS. Nevertheless, EVA can only be calculated for listed companies, which makes it difficult to use this indicator to measure value creation for non-listed companies. In this way, some alternatives have been used such as the accounting beta to calculate the return on equity and subsequently the determination of the EVA. Within this framework, the central point of this research is to empirically verify the idea that the normal EVA and EVA calculated using accounting beta are the better measure than traditional indicators to explain MVA. A panel of 32 companies traded on the Casablanca Stock Exchange over the period 2015–2019 was selected for this study. The regression method on panel data was used. The results show that normal EVA is a superior metric than the classical indicators to explain MVA. In addition, the EVA calculated from the accounting beta could be used as a measure adapted to the case of unlisted companies to measure value creation.
-
The ability of cash flows to predict the earning: Evidence from Jordan
Mohammad Fawzi Shubita 
doi: http://dx.doi.org/10.21511/imfi.18(4).2021.04
Investment Management and Financial Innovations Volume 18, 2021 Issue #4 pp. 36-44 Views: 681 Downloads: 342 TO CITE АНОТАЦІЯThis study aims to investigate the ability of cash flows components to predict the earning and to know the extent of the relationship between accounting profits and cash flow measures. The study sample consisted of 77 industrial companies listed on the Amman Stock Exchange in Jordan for the period from 2006 to 2019. This study relied on the regression method to test the relationship between the study variables. The study findings showed that the cash flows from operating, investing, and financial activities have a statistically significant impact on predicting future earnings. The study also examined the effect of length of operating cycle and company’s size on the predictive ability of cash flows regarding future earnings. The main results for this aspect are that large companies and short operating cycle companies have higher prediction ability for future earnings than small and long operating cycle companies. This paper provides evidence of the information content of cash flows for future earnings in emerging markets like Jordan and is important for Jordanian shareholders by enabling them to evaluate company’s performance.
Acknowledgments
I would like to thank Amman Arab University for its great support, and for funding this study.
