Value Relevance Change Under International Accounting Standards: An Empirical Study of Peru

Abstract

In face of broad adoption of International Financial Reporting Standards (IFRS), the Securities and Exchange Commission (SEC) is considering its quality and acceptability. This paper reports a study that examines changes in value relevance with a sample of Peru firms mandated to use international accounting standards between 1999 and 2007. The period under study is broken into a period of International Accounting Standards (IAS) between 1999 and 2001, a period of early IFRS between 2002 and 2004, and a more recent period of IFRS between 2005 and 2007 by major changes to accounting standards. The empirical results generally indicate that value relevance improved from the IAS period to the early IFRS period when the International Accounting Standards Board (IASB) took over the International Accounting Standards Committee (IASC), but worsened from the early IFRS period to the recent IFRS period when more accounting standards started to reflect IASB's preference for fair value measurement of assets and liabilities. Quality weakens to a greater extent for firms with more discretion for fair value estimates. Further analysis shows that such changes are less likely to result from changes in economic conditions, but from the changes of the standards. The findings are particularly alarming in face of rising IFRS adoptions and call for quality improvement to IFRS.

Post-Earnings Announcement Drift in Greece

“…A study of the Cypriot market was motivated by similar concerns and reported results rather similar to our own (see Vafeas et al, 1998). Liu et al (2012) present evidence of the effect of international financial reporting standards (IFRS) compliance on the value relevance of earnings in Peru. Here, we focus on the PEAD anomaly in the Greek market in a era of radical accounting change and report a resurgence in PEAD compared to that observed in an immediately prior period.…”

The effect of IFRS on corporate governance in peruvian corporations

“…contrary to the research by Liu et al (2012), this paper reaches a different conclusion regarding the value relevance of accounting numbers in the period following the early adoption of IFRS in Peru: there is high value relevance not only in the early IFRS adoption period, but also in the period after 2004.…”

“…Findings: This paper studied the value relevance of accounting figures in the Lima Stock Exchange between 1994 and 2012. On one hand, it complements previous studies by Ndubizu and Sanchez (2006), Liu et al (2012), andMartínez, P. et al (2012), which covered different periods (from 1994 to 1999 for the first one, 2002 to 2009 for the second, and from 1999 to 2007 for the latter). On the other hand,…”

Does institutional ownership affect the value relevance of accounting information?

“…Relevant accounting information from different sources, including financial statements, can alter users’ investment and credit decisions (Deegan, 2016; Krause and Tse, 2016; Comiran et al , 2018). Hence, the VR of accounting information can be assessed by the financial statements’ capacity to capture information that significantly influences a firm’s equity value (Francis and Schipper, 1999; Liu et al , 2012; Cheng et al , 2013). The development of the stock markets needs relevant accounting information, that is useful and effective in decision making (Ji et al , 2015; Chen et al , 2016).…”