IFRS, synchronicity, and financial crisis: the dynamics of accounting information for the Brazilian capital market

Abstract

This study aims is to investigate the synchronicity levels of shares traded on the spot market of the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) in relation to the accounting convergence process towards International Financial Reporting Standards (IFRS) in Brazil. The term synchronicity refers to the amount that company-specific information and market information are reflected in stock prices. The more share prices reflect company-specific information rather than market information, the greater the informational content of these prices will be in terms of representing the economic value of a particular company. For this investigation, information on companies and shares from 2005 to 2015 was collected, excluding the financial sector. The data were analyzed using cross-sectional and panel regressions. The results indicate a reduction in the synchronicity levels of stocks in the period of full adoption of IFRS in Brazil from 2010 onwards. From 2008 to 2009, which includes the partial adoption of IFRS in Brazil, statistically significant results were not found for the synchronicity levels of shares. However, for times of financial crisis, evidence was found of a reduction in the relevance of accounting information even with the adoption of international accounting standards. The results obtained for the Brazilian context do not support the idea that the adoption of IFRS necessarily causes an increase in the informational content of financial statements and that relevant information is consequently reflected in stock prices.

Increase in Leverage Driven by International Financial Reporting Standards Adoption

“…Our preliminary results showed an increase in market leverage (TML and LTML) for companies affected by the mandatory IFRS, confirming our first hypothesis and suggesting that an increase in transparency of accounting information brought about by IFRS led to a reduction of asymmetric information between investors, shareholders, and stakeholders. These results highlight the importance of information disclosure in financing policy, indicating that IFRS triggered greater interest from foreign investors and analysts (George, Li, & Schvakumar, 2016), aiding in a more effective investor decision-making process if compared to previous accounting standards (Figlioli, Lemes, & Lima, 2017). By using the kernel propensity score match to reduce the selection bias, we were able to compare companies affected by the mandatory adoption of IFRS and companies already adapted to the international disclosure standards as they are listed in B3 special tiers.…”

“…This means that the longer the period in which the companies affected by the law may disclose their information in accordance with the international standard, the smaller the differences between both groups. For Figlioli, Lemes, and Lima (2017), the Brazilian accounting standards, historically, were not geared to meet the demand for information by investors. Because of this, economic consequences arising from IFRS adoption may not be reflected in the short run.…”

Dificuldade financeira e desempenho de mercado de organizações latino-americanas

“…Para definir os períodos de crise, utilizou-se o mesmo método proposto por Figlioli et al (2017), quando o produto interno bruto (pib) do país se apresenta com crescimento negativo é caracterizado em crise. Assim, para a variável, o período de crise é representado por meio de dummy, sendo 1 para ano com crise e 0 para o contrário.…”

Adoção Obrigatória De Ifrs, Governança Corporativa E Valor Da Firma

“…Previous authors analyze some effects of IFRS adoption in Brazil. Figlioli, Lemes, and Lima (2017) indicate reduced synchronicity levels (i.e., an increase in the proportion of company-specific information that affects returns) of shares traded after mandatory implementation of IFRS in Brazil, and Pelucio-Grecco et al (2014) argue that IFRS implementation improves accounting quality by reducing earnings management, particularly for regulated companies. Silveira and Barros (2008) investigate the determinants of corporate governance in Brazil and find ownership concentration is negatively related to corporate governance levels.…”