Impact of international financial reporting standards on the profit and equity of AIM listed companies in the UK

Ali, Arshad; Akbar, Saeed; Ormrod, Phillip

doi:10.1016/j.accfor.2015.12.001

Cited by 16 publications

(19 citation statements)

References 51 publications

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“…In this case, the median value of 0.56 offers a better interpretation than the mean. This result is in line with recent studies by Ali, Akbar, and Ormrod (2016) that found a non-normal distribution of financial performance for AIM-listed firms in the UK and used the median for the interpretation of the descriptive statistics. The median value of 0.56, less than 1, indicates that the share prices of most AIM-listed firms were traded below £1.…”

Section: Presentation and Discussionsupporting

confidence: 91%

Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Boakye

Ahinful

Nsor-Ambala

2020

Indian Journal of Corporate Governance

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Purpose: This article investigates the relationship between executive compensation and financial performance for Alternative Investment Market (AIM)-listed firms in the UK. While most studies have looked at the impact of executive compensation on financial performance, this study argues that the issue of reverse causality cannot be ignored even if it is controlled and therefore investigates the extent to which financial performance can also impact on executive remuneration. Design/methodology/approach: The study relies on a sample of 201 AIM-listed firms in the UK from 2011 to 2016 to examine the relationship between executive compensation and financial performance. It draws on agency and tournament theories to model the relationships between executive compensation and financial performance using various panel regression models. Findings: The findings from the study revealed that the chief executive officer (CEO) remuneration impact on both accounting- and market-based measures of financial performance. It also showed that while performance-based incentives like bonus and other long-term incentives linked to performance significantly impact on financial performance, salary, a cash-based non-performance-related compensation rather negatively affects performance. It was also discovered that financial performance can also influence the level of executive compensation and not always vice versa. Value/originality: The study adds novelties to the existing literature by introducing tournament theory to the studies on the relationship between executive compensation and financial performance. Most of the existing studies have been one sided and emphasise only on the influence of executive remuneration on financial performance. However, based on the tournament theory, the study argued that the issue of reverse causality between the two should not be overemphasised even if it is controlled.

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Section: Presentation and Discussionsupporting

confidence: 91%

Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Boakye

Ahinful

Nsor-Ambala

2020

Indian Journal of Corporate Governance

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“…Abdullah et al, 2015). Therefore, it is imperative for regulatory authorities to consider the fundamental elements of culture when adopting one size fits all reporting regime (Ali et al, 2016). Against this backdrop, it would make an intuitive sense to assume that differences in societies' value systems are likely to affect the acceptance and application of IFRS.…”

Section: The Role Of National Economic Culture Around Ifrs Adoptionmentioning

confidence: 99%

Investors’ herding practice: do IFRS and national economic culture matter?

Danrimi

Abdullah

Alfan

2018

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Purpose The purpose of this paper is to examine the effect of International Financial Reporting Standards (IFRS) and the moderating role of national economic culture on investors’ herding practices in the European Union (EU) equity markets. Design/methodology/approach The study employs and modify two extensively applied herding measures of cross-sectional standard deviation and cross-sectional absolute deviation, using stock return dispersion as a function of aggregate market return as a proxy for herding behavior. The sample period stretches from January 1, 2001 until December 31, 2015. Findings The study finds that mandatory IFRS adoption significantly promotes investors’ herding practice in the EU equity markets. However, taking a further look, the results suggest that the new reporting regime seems not to be the only instigator for the observed herding practice; national economic culture, particularly individualism and masculinity, contribute significantly toward investors’ herd-formation around the mandatory IFRS adoption. Overall, it can be concluded that the notion that the adoption of IFRS improves information-based trading and mitigates irrational investment behavior might totally be inaccurate in some instances. For example, in the case of herding bias, the new reporting regime appears to have promoted the phenomenon. Research limitations/implications The study employs an approach of herd detection, which explores evidence of herding toward the market consensus. Thus, the results do not in any way exclude the possibility that other types of herding behavior exist in the EU equity markets. Notwithstanding this caveat, the findings of this study would be of special relevance to academics, regulators and policymakers in performing a cost-benefit analysis of the IFRS adoption. Originality/value To the researchers’ knowledge, this study is first to explore the nexus between IFRS and investors’ herding practices, while highlighting the role of the national economic culture.

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“…Consistent with previous IFRS research, we also build on positive accounting theory that was developed by Watts and Zimmerman (1986) to complement our understanding of the expected financial market consequences of ISAs adoption. According to positive accounting theory, financial markets are mostly enforced to adopt global accounting and auditing standards as a response to various stakeholders’ pressures, who seek to maximise their utility, which can often lead to unintended financial market consequences because of the inherent conflict of interests the exist between different stakeholders (Sayumwe and Francoeur, 2017; Senyiit, 2014; Samaha and Khlif, 2016; Ali et al , 2016; Ball, 2016; Kimeli, 2017; Kabir, 2010). The adoption of international accounting and auditing standards has both intended and unintended financial market consequences, which might either result in positive or negative effects on capital markets at the macro-economic level (Brüggemann et al , 2013).…”

Section: International Auditing Standards and Financial Market Indicatormentioning

confidence: 99%

Financial market consequences of early adoption of international standards on auditing: international evidence

Elmghaamez

Gerged²,

Ntim

2020

MAJ

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Purpose This paper aims to investigate the effects of the early adoption of International Standards on Auditing (ISAs) on Financial Market Indicators (FMIs) from a diffusion of innovation (DOI) theory perspective. Design/methodology/approach Using panel data from 110 countries in a period that spans from 1995 to 2014, this study applies an ordinary least squares regression model to investigate the financial consequences of adopting ISAs. This analysis was supplemented with estimating a fixed-effects and two-stage least squares regression models to address any concerns regarding the possible existence of endogeneity problems. Findings This study reports three key findings. First, the authors find that early ISAs adoption has a negative effect on several financial market consequences, namely stock market integration, market capitalisation, market turnover, market return, market development, stock price volatility and stock trading volume. Second, using an alternative measure to the one that is proposed by DOI theory, the authors found that some financial indicators have been significantly improved after ISAs adoption, but only for listed firms that prepared their financial statements under International Financial Reporting Standards and audited by ISAs simultaneously. Finally, the financialindicators of European stock markets, however, have insignificantly shrank post the mandatory adoption of ISAs in 2006. Practical implications The empirical evidence raises questions about how ISAs were enforced and implemented. For example, countries that adopted ISAs at early stages may have been dominated mostly by recently established stock exchanges. This implies a crucial need to determine and apply the best type of auditing regime that can increase investors trust and enhance the credibility of stock markets information, which might ultimately advance the FMIs over time significantly. Originality/value To-date, studies investigating the impact of the adoption of ISAs on FMI from a DOI theory perspective are virtually non-existent. The study, therefore, seeks to contribute to the extant literature by examining the influence of ISAs adoption on a wide range of FMIs.

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Impact of international financial reporting standards on the profit and equity of AIM listed companies in the UK

Cited by 16 publications

References 51 publications

Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Investors’ herding practice: do IFRS and national economic culture matter?

Financial market consequences of early adoption of international standards on auditing: international evidence

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