The short- and long-lived effects of IFRS mandate on IPO firms in emerging market economies

Jamaani, Fouad; Alidarous, Manal

doi:10.1108/jfra-11-2020-0324

Cited by 11 publications

(28 citation statements)

References 83 publications

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“…The regression results indicate that the day 1 returns are negatively and significantly related to Ind-AS implying decrease in underpricing with adoption of Ind-AS in the Indian Equity Market. These results align with the work of a few researchers 5,24,26 . However, for the 7th day and 30 th day MAER the relationship is negative but not significant.…”

Section: Multivariate Analysissupporting

confidence: 92%

“…However, since the PD required improved and harmonised disclosures in the prospectus, there was a substantial reduction in underpricing in countries where accounting compliance and enforcement had also increased. Jamaani and Alidarous 24 reported that mandating the adoption of IFRS impacts the information asymmetry of IPO firms and thus reduces the levels of underpricing. Tsai and Huang 13 suggested that the adoption of convergent-IFRS in China had mitigated the phenomenon of underpricing which was not moderated by the proportion of ownership by State Owned Enterprises (SOE).…”

Section: Literature Reviewmentioning

confidence: 99%

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Impact of Ind-AS on IPO Underpricing in India

Kumar,

Totla

2023

JBT

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The present study analyses the collaborative endeavours associated with the evolving modifications in the procedures and regulations governing initial public offering (IPO) processes in India. Partly spurred by the mandated adoption of the Ind-AS (Indian Accounting Standards), which are aligned with International Financial Reporting Standards (IFRS), the study employs a student’s t-test along with multivariate regression on 126 firms listed in India between April 2013 to March 2020 on both BSE and NSE to examine the impact of changes in accounting standards on IPO under-pricing in India. The study finds substantial evidence that transitioning from AS (erstwhile accounting standards based on Generally Accepted Accounting Principles-GAAP) to Ind-AS improved market efficiency and reduced under-pricing. The adoption of Ind-AS also demonstrates a significant impact on the investing community’s investing perception. Further, the study finds that the mean under-pricing was not affected for firms supported by venture capital and group affiliation. The study concludes that regulatory bodies should prioritise enhancing transparency in offer documents to mitigate information asymmetry. This study is a pioneering effort in examining the Indian stock market, serving as foundational research that may be used in future investigations.

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Section: Multivariate Analysissupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 99%

Impact of Ind-AS on IPO Underpricing in India

Kumar,

Totla

2023

JBT

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“…Researchers agree that IFRS requirements lower information asymmetries between market precipitants and improve the quality of financial reporting, resulting in a more transparent market environment (Daske et al, 2008;Hearn, 2014;Houqe and Monem, 2016;Guermazi and Halioui, 2020;Jamaani and Alidarous, 2021;Tsai and Huang, 2021). This is due to IFRS's ability to exclude accounting alternatives, impose additional disclosure IFRS mandatory adoption obligations on users, and define more precise measurement standards than the national Generally Accepted Accounting Principles (GAAPs).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Scholars have attempted to understand underpricing in the global IPO market, particularly in developing economies, by examining a range of IPO underpricing determinants (Ekkayokkaya and Pengniti, 2012;Alanazi and Al-Zoubi, 2015;Chen et al, 2017;Ahmad-Zaluki and Badru, 2020;Lee et al, 2020;Jamaani and Ahmed, 2021;Jamaani and Alidarous, 2021)…”

Section: Factors Affecting Initial Public Offering Underpricing In De...mentioning

confidence: 99%

“…business, offer price, subscription ratio, type of pricing method, elapsed time between announcement date of the IPO and its first trade date, reputation of IPO issuer agents, ownership concentration, presence of venture capital and mandatory adoption of IFRS (Islam et al, 2010;Javid and Malik, 2016;Dhamija and Arora, 2017;Utamaningsih, 2017;Xu et al, 2017;Lee et al, 2020;Alidarous and Jamaani, 2021;Jamaani and Alidarous, 2021;Tsai and Huang, 2021). Habib and Ljungqvist (2001) believe that using reputed underwriters significantly reduces ex ante uncertainty regarding a company's value, decreasing underpricing.…”

Section: Ifrs Mandatory Adoptionmentioning

confidence: 99%

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The combined impact of IFRS mandatory adoption and institutional quality on the IPO companies’ underpricing

Jamaani

Alidarous

Alharasis

2022

JFRA

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Purpose This study aims to examine the impact of the International Financial Reporting Standards (IFRS) mandate and differences in national institutional quality on the underpricing of Initial Public Offering (IPO) companies. Design/methodology/approach Multiple Difference-in-Differences (DiD) ordinary least squares estimations were conducted for 100 corporations listed on the Saudi Arabian stock market using country-level institutional quality data from 2005 to 2017. Findings IFRS requirements and improvements in institutional quality have a combined effect on minimizing IPO underpricing. The analysis of the combined impact of IFRS requirements and differences in transparency revealed that IPO vendors leave $5 on average for IPO investors to cash out post the IFRS mandate, compared to $29 previously. Thus, IFRS serves as a quality certification instrument that alleviates IPO investors’ ex ante uncertainties, even in nations with undeveloped institutions. Practical implications The findings may be beneficial to researchers and policymakers. The results suggest that institutional quality enhancements and obligatory IFRS implementation highlight IFRS’s synergistic influence on the IPO market. While European harmonization efforts drove the adoption of IFRS in Europe in 2005, Saudi Arabia’s adoption of IFRS is not being driven by such initiatives (Daske et al., 2008; Persakis and Iatridis 2017). In reality, when IFRS was officially imposed in Saudi Arabia in 2008, it, like many other emerging market nations, made considerable reforms to its formal institutions. However, research on the combined impact of IFRS and disparities in institutional quality in emerging IPO markets remains sparse. Emerging markets represent more than half of economies that use IFRS. Therefore, to the best of the authors’ knowledge, this study is the first to conduct an empirical investigation to identify this combined effect in emerging countries using the DiD analytical technique. Equity market legislators remain concerned regarding IPO underpricing, as it has a detrimental influence on economic growth (Bova and Pereira, 2012; Jamaani and Ahmed, 2021; Mehmood et al., 2021). Depending on the degree of information asymmetry in national stock markets, underpricing costs increase the cost of going public for entrepreneurs. Consequently, prospective private firms are discouraged from accessing equity financing through the stock markets. This is likely to impede private sector development plans, causing a negative effect on economic growth. Originality/value Emerging countries represent over 50% of the IFRS mandating economies. However, there is insufficient research on the combined effect of IFRS requirements and improvements in institutional quality in developing IPO markets. To the best of the authors’ knowledge, this study is the first empirical attempt to identify this combined effect in one of the largest developing countries. The results may aid academics and policymakers in better understanding the interaction between these two variables.

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Does the appointment of the three musketeers reduce IPO underpricing? global evidence

Jamaani

Alidarous²

2022

Eurasian Bus Rev

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The short- and long-lived effects of IFRS mandate on IPO firms in emerging market economies

Cited by 11 publications

References 83 publications

Impact of Ind-AS on IPO Underpricing in India

Impact of Ind-AS on IPO Underpricing in India

The combined impact of IFRS mandatory adoption and institutional quality on the IPO companies’ underpricing

Does the appointment of the three musketeers reduce IPO underpricing? global evidence

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