This study examines the association between changes in accounting performance resulting from mandated adoption of International Financial Reporting Standards (IFRS) and managerial incentives to engage in opportunistic equity issuance. Based on 2,719 Australian and the European Union firms that are required to adopt IFRS starting in 2005, I find that firms disclosing a material decline in reported net income under IFRS relative to reported net income under local standards are revalued downwards, while firms disclosing a material improvement in reported net income under IFRS relative to reported net income under local standards are revalued upwards. This indicates that relative to financial statements prepared according to local accounting standards, financial statements under IFRS convey new information that impacts market value.
Building on the market timing hypothesis, I find that managers exploit their private information about the effects of changes in accounting standards on accounting performance and that managers strategically time equity issuance before their firms disclose those effects. In particular, during the three-year window prior to a firm disclosing the financial statement effects of IFRS adoption, the firm’s likelihood and size of equity issuance are negatively associated with the change in reported net income resulting from IFRS adoption. This is consistent with the prediction that firms whose reported performance is negatively affected by mandated changes in accounting standards are more likely to issue equity and issue a larger volume of equity in advance of the disclosure of those negative effects. The association between equity issuance and the relative decline in accounting performance resulting from IFRS adoption is robust to alternative definitions of equity issuers, specifications and measures of accounting performance, and changes in sample composition. I find some evidence that equity issuance is positively associated with earnings forecast optimism, where earnings forecast optimism is another proxy for information asymmetry arising from mandatory adoption of IFRS. / Thesis (Ph.D, Management) -- Queen's University, 2008-07-10 17:39:27.512
| Identifer | oai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:OKQ.1974/1308 |
| Date | 11 July 2008 |
| Creators | Wang, Shiheng |
| Contributors | Queen's University (Kingston, Ont.). Theses (Queen's University (Kingston, Ont.)) |
| Source Sets | Library and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada |
| Language | English, English |
| Detected Language | English |
| Type | Thesis |
| Format | 635626 bytes, application/pdf |
| Rights | This publication is made available by the authority of the copyright owner solely for the purpose of private study and research and may not be copied or reproduced except as permitted by the copyright laws without written authority from the copyright owner. |
| Relation | Canadian theses |
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