The impact of financial instruments disclosures on the cost of equity capital

Hussainey, Khaled; Albitar, Khaldoon

doi:10.1108/ijaim-02-2021-0052

Cited by 11 publications

(8 citation statements)

References 96 publications

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“…Some studies navigate the impact of adopting a single financial instrument standard on the firm value, value relevance or the cost of equity capital. For example, Yamani et al (2021) studied the impact of financial instrument disclosures on the cost of equity capital, and they revealed that compliance with IFRS 7 disclosures reduces the cost of equity capital. On the other hand, Gómez-Ortega et al ( 2022) studied the impact of the first application of IFRS 9 on the financial statements of the credit institutions listed in Spain and found positive and negative impacts of the first adoption of IFRS 9 on the results of the companies.…”

Section: Literature Reviewmentioning

confidence: 99%

The Implication of IFRS Financial Instruments Disclosure on Value Relevance

Alsarayreh

Altarawneh

Eltweri

2022

JRFM

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The main objective of this research is to examine the effects of financial instruments declared under IFRSs on value relevance over thirteen years. The research sample included 35 European enterprises that were listed on the main market of the London Stock Exchange from 2007 to 2019. This study focuses on the adoption of IFRS.7 and IAS.32 disclosure standards, in line with previous studies. The Ohlson model (1995) was utilised in the study to evaluate the dependent variable since it is the module used most often in determining value relevance. The findings indicated that financial knowledge about financial instruments (FI) was typically valuable throughout the research. In addition, the significance of financial instruments and other disclosures when examining sub-components were not valued as relevant but rather provided information regarding the kind and level of exposure to FI risks. Furthermore, the earnings and book value of the common equity have a favourable impact on the value relevance. Hence, the key contributions of this study went beyond enriching the body of literature to make recommendations regarding the most influential determinant among financial instrument items that positively enhance value relevance.

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Section: Literature Reviewmentioning

confidence: 99%

The Implication of IFRS Financial Instruments Disclosure on Value Relevance

Alsarayreh

Altarawneh

Eltweri

2022

JRFM

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“…This transparency helps investors gain confidence in the financial institution's operations and reduces the estimated risk associated with investing in it. This implies that they would find contentment with a reduced proportion of returns in exchange for the assurance they receive (Yamani et al, 2021b). Therefore, compliance with IFRS 7 disclosure requirements leads to a lower cost of capital.…”

Section: Regressions' Results and Discussionmentioning

confidence: 99%

“…This reform has consequently amended the dispositions of IFRS 7 regarding the classification of financial instruments, credit impairment and hedge accounting. These recent updates of IFRS 7 have stimulated an interest in financial instrument disclosure among academics and practitioners (Yamani, 2021b). Hence, it seems interesting to investigate the economic consequence of compliance with a standard in perpetual change like IFRS 7.…”

Section: Introductionmentioning

confidence: 99%

“…First, our paper contributes to the value relevance literature by providing further empirical evidence from a developed capital market. To our knowledge, except for the studies of Tahat et al (2016) and Yamani (2021b) what were conducted in emerging settings, no prior research has examined the value relevance of IFRS 7 disclosure requirements. Second, the present paper addresses the paucity of prior research studying the issue in the financial sector (Bolibok, 2015;Tsalavoutas et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

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Value relevance of compliance with IFRS 7: evidence from Canada

Mnif,

Znazen

2023

JAAR

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PurposeThis paper aims to test whether the extent of compliance with International Financial Reporting Standards (IFRS) 7 requirements is value relevant and whether it influences the value relevance of the firm's accounting information (book value of shareholders' equity and net income).Design/methodology/approachThe sample for this paper consists of 288 financial institutions listed on the Toronto Stock Exchange (TSX) from 2016 to 2019. Panel regressions have been used in this study.FindingsThe findings reveal that compliance with IFRS 7 is positively associated with the firm's market value. After making a classification between high-compliance and low-compliance companies, the authors' results indicate that the compliance level is positively associated with the value relevance of net income. Surprisingly, when examining the value relevance of financial instruments disclosures (FID) supplied after the adoption of IFRS 9, the authors find that book values of shareholders' equity and earnings are not more value relevant in the post-IFRS 9 period.Research limitations/implicationsGiven that the authors' analysis has been restricted to the Canadian setting, the regression results might not be generalized for other countries with different capital markets features.Practical implicationsThe authors' findings point out that FID can affect investors' decisions as well as their confidence in the companies in which they invest. Hence, the regulatory bodies should gear more efforts to ensure high-compliance levels.Originality/valueTo the best of the authors' knowledge, this research is among the first attempts to investigate whether the new FID (after the adoption of IFRS 9) improves the firm disclosure quality and enhances the value relevance of accounting information.

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“…Other limitation of our study is that we have focused only on the financial institutions, which future studies could examine such relationship on the non-financial institutions. Recent studies show that the adoption of mandatory IFRS affects cost of capital in GCC [48], it would be interested to examine the impact of SDGs reporting on cost of capital in the same context. Finally, research shows that COVID-19 pandemic affects the quality of external auditors [49]additional research is needed to explore the impact of the quality of external auditors on SGDs reporting in times of COVID-19 pandemic.…”

Section: Discussionmentioning

confidence: 99%

Does Sustainable Development Goals Disclosure Affect Corporate Financial Performance?

Lawati

Hussainey

2022

Sustainability

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This study provides empirical examination of Sustainable Development Goals (SDGs) reporting in Oman. It also examines the impact of SDGs reporting on corporate financial performance. The study adopts content analysis of the narrative sections of the annual reports to measure levels of SDGs reporting. The study examines all financial companies listed on the Muscat Stock Exchange over the period of 2016–2020. Regression models are used to examine the impact of SDGs on corporate financial performance. Our analysis adds to the literature in two crucial respects. First, we provide evidence that financial institutions in Oman have performed poorly in SDGs reporting. Second, we provide evidence that SDGs reporting positively affects corporate financial performance. Our findings offer solid practical implications to regulators, different stakeholders, policymakers, board members, and managers. The study makes an important and novel contribution to corporate disclosure literature. So far as we know, it is the only paper to examine levels of SDGs reporting in financial institutions in a developing country. Moreover, to the best of our knowledge, it is the first paper to show that SDGs reporting is positively associated with corporate financial performance.

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The impact of financial instruments disclosures on the cost of equity capital

Cited by 11 publications

References 96 publications

The Implication of IFRS Financial Instruments Disclosure on Value Relevance

The Implication of IFRS Financial Instruments Disclosure on Value Relevance

Value relevance of compliance with IFRS 7: evidence from Canada

Does Sustainable Development Goals Disclosure Affect Corporate Financial Performance?

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